Chapter 8 v.2 Flashcards
What are claim reserves
An estimate of the amount claims are going to be paid out
What are the three main things to take into account on a claims reserve
What a claim will settle for + External costs (loss adjuster) + Allowance for inflation
Will a windscreen claim have inflation?
No, fixed right away
Will a personal injury claim have inflation?
Yes, takes a while to settle
What happens if you under reserve
BAD - You haven’t got enough money to pay claims. Which will result in bankrupt/ problem with pricing as u/w/ actuaries will have been using claim reserves for pricing
What happens if you over reserve
You tie up a lot of your capital and put it as a liability but it isn’t so can’t afford to buy new things. Pricing model will be too high so won’t get new business/ renewals
What are reserving actuaries
Look at claims run off and look at the claims were reserved at and not settled at
What is IBNR
Incurred but not reported - amount actuaries put aside for claims that haven’t been reported yet. Based on claims development tables
What is IBNR based on
Claims development tables
What sort of claims for IBNR
Long time claims - like asbestoses, noise claims, disease claims
What is IBNER
Incurred but not enough reported - when actuaries calculate that there has been under reserving by a certain % and needs an uplift. Its a one of adjustment. Think Ogden table.
What is an unearned premium reserve
The unearned premium - the allowance in the book for all the risks
What is your unexpired risk provision `
Only used when the actuaries think been undercharging - when unearned premium isn’t enough
What is the difference between IBNER and unexpired risk provision
IBNER - don’t reserve for claims enough.
Unexpired risk provision - don’t charge enough
What are the four claim methods determined by the actuaries
Projection of paid claims
Projection of incurred claims
Loss ratio method
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