Trend considerations, both with respect to exposure and loss cost, are vital to several methodologies used in loss reserving. This session will examine how the recognition of trends impacts the indications produced by some of these methodologies (Bornhuetter-Ferguson, etc.).
Sources for trend, both implicit in the data or culled from external resources will be discussed. Commonly used external resources, such as the Masterson indexes and the Bureau of Labor Statistics, will be presented and evaluated, as well as some not as commonly used by the workers' compensation actuary. The evaluation of changing environmental factors, such as economic conditions and legislative reform, on trend will be examined.
A focus of the session will be the common use of severity trend without consideration of frequency trend, especially when external sources are utilized.