Term Of The Day – Loss Reserve Stability
An actuary’s ability to project Workers Compensation loss reserve or pricing in the future is based upon numerous inputs. One of those inputs is the amount of time covered by the data. If the actuary has 10 years of data, he/she will be more able to accurately predict future losses than with two or three.
The longer time span will enhance the loss reserve stability. Spikes in reserving may result in skewed statistics over less than a four year time span.
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