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  #11  
Old 06-18-2019, 03:15 PM
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Thank you for your inputs. Real life rating variables include roof type, building codes and etc. So I tend to believe that premium trend (premium per exposure) for residential property could go either negative or positive.
I'd be careful how you describe it. IME HO premium trend is normally average on-leveled premium per house year, thus inflationary changes in coverage exert strong upward pressure and result in the positive premium trend stereotype. Simply saying "premium per exposure" is vague because in your analysis you're using the biggest driver of "normal" premium trend as your base unit.
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Old 06-18-2019, 03:32 PM
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I'd be careful how you describe it. IME HO premium trend is normally average on-leveled premium per house year, thus inflationary changes in coverage exert strong upward pressure and result in the positive premium trend stereotype. Simply saying "premium per exposure" is vague because in your analysis you're using the biggest driver of "normal" premium trend as your base unit.
Premium trend from "average on-leveled premium per house year" definitely pick up the inflationary changes. I assumed that the subject company's annual policy limit increase will take care of inflation and therefore, inflation is not intended to be part of my premium trend. Just curious, if you apply both premium trend and policy limit increase, would the inflation be double-counted and result in over-charge assuming positive inflation here?

Last edited by ActuaryInWoods; 06-18-2019 at 03:39 PM..
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Old 06-18-2019, 03:58 PM
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The policy limit increase should be a component of premium trend, as trend in the average amount of insurance is a proxy for inflation. I would not incorporate both directly.
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Old 06-18-2019, 05:42 PM
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The policy limit increase should be a component of premium trend, as trend in the average amount of insurance is a proxy for inflation. I would not incorporate both directly.
if the company increases policy limits at renewal (so called inflation sensitive exposure), what's the point to keep policy limit increase as a component of premium trend? I understand that the premium trend (average on-level premium per policy limit) could pick the residual impact left out by the actual policy limit increase.
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Old 06-19-2019, 08:58 AM
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Working with a "rate per exposure unit," then your premium trends are far more likely to be driven by shifts in the book and/or pricing. The latter will contemplate inflationary pressures as well as changes in claim experience.

I would also recommend that you look into (and learn) about the underwriting cycle of the insurance industry as this will also drive "rate change expectations".

And to get an answer to your question, find a handful of states that have easy to navigate DOI pages and look up filed rate changes (whether approved or not) for several larger companies over a 2-year span. Patterns (and trends) within that information can help answer the question of where the industry is wrt the underwriting cycle.
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