- TIA EXAM 5 - FRIEDLAND CH 03

• 1. Exploratory analysis of the data
• 2. Apply appropriate techniques for estimating unpaid claims
• 3. Evaluate conflicting results of the various methods
• 4. Monitor projections of clm dvpmt over subsequent calendar periods

• Large insr often solely rely on internal data (may use ext for new lob/terr)
• Small insr have small volume w. less credibility
• Examples of external sources: ISO, NCCI, RAA, Best

• Tail devpmt factors
• Trend rates
• ECR
• Evaluating and reconciling results of various methods

• Insurance products
• Case O/S & Settlement practices
• Insurers' operations
• Coding
• Geographical areas
• Mix of business & product types

• Consistency of coverage triggered by claims
• Volume of claim counts
• Ability to develop appropriate Case O/S estimate
• Settlement or payment patterns
• Likelihood of claim reopening
• Severity

Divide data into sufficiently homogeneous groups without compromising credibility of data

* Increased homogeneity or increasing volume of data tends to increase credibility

Conflicting goals: increasing homogenity decreases volume and credibility

• Nbr of claims over treshold
• Size of claim relative to policy limits
• Size of claim relative to reinsurance limits
• Credibility of internal data regarding large claims
• Availability of relative external data

• Consistency w/ financial statement data
• Consistency w/ prior data
• Data reasonableness
• Data definitions

• Transactional data
• CY rpd = pd + beg - end
• Primary used for aggregation of exposures
• Adv: no dvpmt, readiliy available
• Dis: inability to address issue of dvpmt

• CY exposures often used w. AY claims
• Adv: grouping easy to achieve and understand; shorter time frame than PY; track economic or regulatory chg
• Dis: mismatch btwn clms and exposures; can mask chg in retention

• Clms extend over a 24 mths period
• Adv: true match btwn clms and exposures; track uw or pricing chg
• Dis: extended time frame; difficult to isolate and understand affect of a single large event

• Claims-made coverages is dependent on rpt date
• Used to estimate value of know clms
• Adv: nbr clms is fixed
• Dis: only measures dvpmt on know clms and NOT IBNR