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1、2014-CAS8§23Bailey&Simon,Cred.ofSingleCarHCM5/13/14,Page1367Section23,BaileyandSimon,MeritRating10571058Intheirclassicpaper,BaileyandSimonuseMeritRatingdatatodeterminethecredibilitytoassigntotheexperienceofasingleprivatepassengercar.ThemostimportantpartsofthisconcisepaperareTables2a
2、nd3,andtheirconclusions.Akeyconceptisthatwhenusingcredibility,Zisthediscountcomparedtoaveragegiventoaninsuredwhoisclaims-free.Thiscredibilityvariesbyclassandthenumberofyearsclaims-free.MeritRatingisaverysimplifiedformofExperienceRating.Ashasbeendiscussedpreviously,onewaytoanalyzeExp
3、erienceRatingistocompareexperienceduringapriorandsubsequentperiodinordertodeterminehowaplanwouldhaveworkedinthepast.1059Bailey-SimoncompareapriorthreeyearperiodtoasubsequentoneyearperiodforPrivatePassengerAutomobileInsuranceinCanada.1060Theycomparethesubsequentfrequencyforgroupswith
4、differentnumbersofyearsclaims-free.1061TheyfoundthatMeritRatinghasusefulpredictiveabilitybeyondthatofclassandterritory.10621057“AnActuarialNoteontheCredibilityofExperienceofaSinglePrivatePassengerCar,”byRobertA.BaileyandLeroyJ.Simon,PCASXLVI,1959,pp.159-164.Includingdiscussionofpape
5、r:Hazam,W.J.,PCASXLVII,1960,pp.150-152.CASLearningObjectivesA1-A2.1058Thisexcellentpaperhasbeenontheexamsyllabussinceshortlyafteritwaswritten.Thusithasbeenonthesyllabusforabouthalfacentury!1059However,theirmethoddiffersfromthosediscussedbyGillam,Venter,andMahlerintheirsyllabusreadin
6、gs.1060Forthepriorperiodtheyonlyrecordhowmanyyearsacarhasbeenclaims-freepriortothe“present”.1061IntheirmuchlessimportantTable4,theylookatlossratios,whichinvolvedollarsofloss.1062Sincetheaverageannualfrequencyislow,threeyearsofprivatepassengerautodataforasinglecarcontainsalotofnoisea
7、ndrelativelylittlesignal;thecredibilitiesaremuchsmallerthanthoseforalargecommercialinsured.2014-CAS8§23Bailey&Simon,Cred.ofSingleCarHCM5/13/14,Page1368MeritRatingPlans:1063TheCanadianMeritRatingPlaninplacewhenBaileyandSimonwrotetheirpaperisrelativelysimple.1064Thosewhoareclaim-freef
8、oronlyoneyeargetadi
