What does Credibility mean? Read on to discover the definition & meaning of the term Credibility - to help you better understand the language used in insurance policies.
(1) An actuarial term describing the degree of accuracy in forecasting future events based on statistical reporting of past events. (2) The weight assigned or assignable to observed data in contrast to that assigned to an external or broader-based set of data. Credibility is used to provide a measure of the relative predictive value of the data being reviewed. Weights can be determined through detailed formulas or by judgment. The weight assigned should generally increase with the number of exposure bases in the observed data and should decrease with higher levels of variability in the observed data.
We hope the you have a better understanding of the meaning of Credibility.