Why exposure breaks a naive count model. Suppose you model claim counts across policies. A policy in force twelve months should produce more claims than one in force two months, purely from time exposed. If you regress raw counts on rating factors, the model confuses "more exposure" with "riskier." You...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Bottom Line
- Exam Shortcuts
Learning objectives
- 4b
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