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Dollar-based vs Count-based ULAE methods
Dollar-based assumes ULAE tracks w. loss dollars
Count-based assumes that same kind of transaction vost same amt of ULAE
Divergent assumptions may not affect results severely (only need to be correct for the avg)
Classical pd to pd ratio for ULAE
Generally assumes that 50% of ULAE occurs when clm is rpt, and 50% when it's closed
Kittel's refinement for ULAE
Explicitely recognize the fact that ULAE is inc as clm as rpt, even when no loss pmt are made
Use ratio of pd ULAE to ½*(pd + inc)
Generalized approach to est ULAE
Definitions
U
_{1/2/3}
= & of ult ULAE spent on opening/maintaining/closing
R/C/P = ult cost for clms rpt, closed, pd
W = ratio of ult ULAE to ult losses
M = total ULAE for period
B = loss basis for period
Formulas
M = (R*U1*W) + (P*U2*W) + (C*U3*W)
B = M / W
Final result
Approach similar to ELR
: Unpd ULAE = (W
^{*}
* L) - M
Approach similar to BF
: Unpd ULAE = W
^{*}
* (L - B)
Approach similar to dvpmt
: Unpd ULAE = M * (L / B - 1)
Generalized approach to est ULAE
Practical difficulties
Inconsistencies in the reporting of clm adj exp
Estimation of R and C may not be trivial
Ignores cost of reopening and reclosing
Loss inflation can cause material distortions
Author
Esaie
ID
33888
Card Set
Conger & Nolibos
Description
Exam6 by Esaie Conger & Nolibos
Updated
2010-09-11T01:58:07Z
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