Exolain when the actuarv uses an exnnsure trend fartor

Answer the following questions using the table below:

a$.$ Calculate the loss cost for each policy year.

b$.$ Calculate the trended loss cost for each policy year.

c$.$ Calculate the average trended loss cost.

$\backslash$table$[[$Policy Year,$\backslash$table$[[$Estimated$],[$Ultimate$]],$OBEs,Loss Cost,Loss Trend

$\backslash$table$[[$Exposure$],[$Trend$]],\backslash$table$[[$Trended$],[$Loss Cost$]],],[2011,2,200,000,848,,1\mathrm{.}062,1\mathrm{.}000,],[2012,2,224,000,848,1\mathrm{.}051,1\mathrm{.}000,,],[2013,2,679,000,848,1\mathrm{.}041,1\mathrm{.}000,,],[2014,2,711,000,848,1\mathrm{.}030,1\mathrm{.}000,,],[2015,2,958,000,848,1\mathrm{.}020,1\mathrm{.}000,,],[2016,2,880,000,848,1\mathrm{.}010,1\mathrm{.}000,,]]$

Average Trended Loss Cost

$4.$ Explain why the average trended loss cost is understated.