Date:         Thu, 10 Jan 2008 06:47:13 -0800
Reply-To:     vatodorov <vatodorov@GMAIL.COM>
Sender:       "SAS(r) Discussion" <SAS-L@LISTSERV.UGA.EDU>
From:         vatodorov <vatodorov@GMAIL.COM>
Organization: http://groups.google.com
Subject:      How to correctly calculate average duration of insurance policies?
Comments: To: sas-l@uga.edu
Content-Type: text/plain; charset=ISO-8859-1

The average duration is influenced by the length of a policy and the
total number of policies. If you have 10 policies to start with in
January 2008 the average duration will increase throughout the year.
However a sudden influx of new policies will decrease sharply the
duration, which creates a biased estimate of the average length for
the policies that stick in the portfolio. Eventually, as the number of
policies increases, the duration will tend to go down, which is not
correct.

There was an idea of using median duration instead of average, which
is somewhat better. Does anyone have a suggestion of what metric can
be used, either an index or something else?

thanks,
Valentin