Calculators › Ratios & Underwriting
Trend historical losses to a future policy period with an annual trend rate and exact trend period.
Claim costs rise over time with inflation, medical costs and litigation. Before historical losses are used for pricing, they are trended to the future period the new rates will cover.
Trend factor = (1 + Annual trend)^(Years between average accident date and future average loss date).
$2.4M of losses trended at 6.5% for 2.25 years: factor 1.152, trended losses $2.76M.
From the average accident date of the experience period to the average accident date under the new rates — typically the midpoint of the future policy period.
Actuaries often do, then combine them into a pure premium trend.