Modified Severity

maenchemaenche
in Bahnemann.Chapter6

Why is the "fixed ALAE per claim, epsilon" not included in the modified severity calculation? Does it wash out in the calculation? I can't seem to find any confirmation of that.

This came up for me in reviewing the Chap 6 problem set 2, questions 3 & 4. The fixed ALAE in both of those problems is not taken into account when calculating the modified severity. In problem set 1 it was $0 so it didn't come up.

Thanks.

Comments

  • adminadmin

    Good call out. It should be included in the modified severity calculation - we inadvertently followed Bahnemann's Example 6.7 a bit too closely.

    We've updated the wiki, Excel files and PDFs to properly include the fixed ALAE in the modified severity calculation. Our apologies for the inconvenience.

    Please note you may need to clear your browser cache in order to download the latest Excel files.

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