What is the purpose of ASOP 13?
Provide guidance to actuaries when performing professional services using trending procedures to estimate future values
What is the Scope of ASOP 13?
- Applies to estimating future values using trending procedures
- Does not apply to development
- Can depart from guidance to comply with applicable law or other reason actuary deems appropriate
terms and conditions of a contract that create an obligation for claim payment associated with contingent events
Define Experience Period
time period to which historical data pertains
Define Forecast Period
future time period of projections
Define Social Influences
Societal changes such as claims consciousness, court practices, judicial attitudesand other noneconomic factors that impact insurance costs
Define Trending Period
time over which trend is applied in projecting from the experience period to forecast period
Define Trending Procedure
- Evaluating how changes over time affect
- retention rates,
- marketing response rates, and
- economic indices.
- Trending procedures estimate future values by analyzing changes between exposure periods
When selecting data, what is to be considered?
- Credibility assigned to data
- Time period for which data is available
- Relationship to items being trended
- Effect of known biases or distortions on data
- *impacts of cats, seasonality, nonrecurring events, claim practices.
When selecting trending procedure, actuary should consider:
- 1. Procedures established by precedent or common usages
- 2. Procedures in previous analysis
- 3. Procedures that predict insurance trends based on insurance, econometrics & other non-insurance data
- 4. Context in which the trend estimate is used in overall analysis
When selecting trending period, should consider:
- lengths of experience & forecast period
- change in mix of business btwn experience and forecast
What should actuary disclose in their communications?
Intended purpose or use of trending procedure, including adjustments considered appropriate
Significant adjustments to data or assumptions in trend procedure that may impact result
- When specify range of trend estimates, should disclose basis of range provided
Disclose assumptions, procedures, methods or models that may affect result
If actuary deviates from guidance in standard, should include
Material assumption or method prescribed by applicable law
- Material assumption or method selected under applicable law by someone other than actuary and
- actuary disclaims responsibility
- Actuary disclaims responsibility for material
- assumption or method not listed above
Actuary otherwise deviates from guidance of ASOP