Revisiting Credibility Approaches for Group Life Underwriting

We all have a basic idea of what it means for experience data to be credible; that is, it must be reliable and predictive, but what makes one set of data more predictive than another? Or "how can we quantify our confidence in the ability of the experience to predict future claims?" Pricing actuaries use credibility formulas to determine the reliability of the data, but how do they settle on which formula to use? The answer is that there really is not just one right answer. Based on our observations of the Group Life industry and our own experience and research, this article will describe the most common approaches used today.

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