Welcome to the hotseat. We've prepared a guide if you'd like to read more about how it works.

Uniform distribution of policy anniversaries

0 votes
asked Jun 16 in BUS 3018F - Models by michwairish (320 points)

When trying to calculate the average age at the beginning of the rate interval, I understand how we use the assumption of uniformly distributed birthdays during the calendar year, but if we don't have a uniform distribution of policy anniversaries, e.g. we have a large influx of policyholders in a particular month of the calendar year, how would that affect the average age at the beginning of the rate interval?

1 Answer

0 votes
answered Jun 17 by joshua_wort (1,490 points)
Your question does not make exact sense, are you talking about a calendar year or policy year rate interval?

For a calendar year rate interval starting on 1 Jan, where there is a large influx of policyholders at let's say the end of April, the assumption of uniform distribution of birthdays over the rate interval is not really violated, but since these new policyholders were not exposed for the first 4 months, this is similar to assuming a slightly higher average age at the start of the rate interval.