Ruy A. Cardoso
Abstract
Techniques for estimating future insured losses in casualty insurance typically assume consistency in the insurance environment over time. Statutory changes, however, can create sharp discontinuities in the loss-generating process, complicating the estimation of those losses. Using indicator variables and dummy variables allows for quantification of the effect of such discontinuities. Three examples from private passenger automobile insurance are presented to illustrate how these variables can be used.
Key words and phrases: dummy variables, linear regression, tort threshold, coverage stacking, coverage trigger, coverage limits
Ruy A. Cardoso