The Concept of Credibility

Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Introduction to Credibility. 11 min read, ~1,724 words.

Credibility formula:, where = credibility, = individual, = class. is a blending weight measuring statistical trust in the data, not a confidence level or probability. Full credibility ( ): data meets the tolerance standard, class gets zero weight (but this is not a guarantee of accuracy). Partial credibility:, capped at...