Trend
Annual rate of change in claim frequency or severity, used to project past data towards the future.
Actuarial trend is the systematic annual rate of change in a loss metric (frequency, severity, pure premium). Unlike random volatility, it reflects a structural shift. A frequency trend of −2%/year means frequency falls 2% per year, for example as safety systems improve. A severity trend of +6%/year reflects repair cost inflation. The compound trend (frequency × severity) gives the pure premium trend. To project historical data to a future rating period, the actuary applies the trend factor: Future value = Past value × (1 + trend)^n. Identifying and measuring trend is a major actuarial exercise. The result is sensitive to the time window chosen and to biases in the data.
2022 frequency: 8.5%. Frequency trend −1.5%/year. Projected 2025 frequency: 8.5% × (1−0.015)^3 ≈ 8.1%. 2022 severity: 4,500 EUR, +5%/year → 2025: 5,209 EUR. 2025 pure premium ≈ 8.1% × 5,209 ≈ 423 EUR.
claims trend, loss trend, trend factor
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