# A.6. Couret & Venter - WC Credibility

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1. Types of injuries
• fatal (F)
• permanent / temporary total injury (PT / TT)
• major / minor permanent partial impairment (major / minor)
• temporary total (TT)
• medical-only (med)
2. Development of the credibility procedure
• serious injury types have low frequency and therefore unstable claim counts
• however they're correlated (caused by similar events) so this can be used to derive credibility
• Robertson didn't use information about correlation between injury types
3. 3 methods to estimate injury type ratios for a class
• hazard group injury type ratio (Vh)
• raw sample data injury type ratio (Vi)
• injury type ratio from credibility procedure (vest)
4. Holdout sample
• split dataset in 2 parts w/o bias (paper uses odd & even years; could use random selection)
• build model on 1 part of the data
• test model predictions on other part of data
5. Multi-dimensional credibility procedure
• create holdout sample
• want to get credibility-weighted ratios viest where instead of just using one credibility z and the same-type complement by hazard group, they use multiple injury types and compare each class level ratio by injury type to the hazard ratio for that injury type
• single: viest = ZVi + (1 - Z)Vh = Vh + Z(Vi - Vh)
• multi: viest = Vh + b(Vi - Vh) + c(Wi - Wh) + d(Xi - Xh) + e(Yi - Yh)
6. Expected excess losses at limit L for class i for Fatal claims
• (Payrolli/100) * (FreqTT,i) * (SevTT,i) * (viest) * (SevRelV,i) * [1 - LERV,i(L)]
• then sum across all injury types to get total expected excess losses
7. SSE Test
• SSE = ∑(V* - Vholdout)2 → credibility procedure works best but barely:
• estimators from even years data designed for that data
• class data by year is volatile
• HG A specifically has very homogeneous classes, so injury type ratio doesn't vary much
8. Quintiles Test
• sort all relativities in increasing order
• group classes into 5 groups based on sorted relativities with ≈ same # of TT claims
• calculate average by class in each quintile and divide by injury type relativity for the HG
• calculate SSE for each method as SSE = ∑(V*/Vh - Vholdout,quintile/Vholdout)2
• substantial reduction in SSE in new method (except class A deemed homogeneous)

### Card Set Information

 Author: EExam8 ID: 305264 Filename: A.6. Couret & Venter - WC Credibility Updated: 2015-09-05 15:40:34 Tags: Couret Venter WC Credibility Folders: Description: Couret & Venter - Using Multi-Dimensional Credibility to Estimate Class Frequency in Work Comp Show Answers:

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