Chapter 9

Question 1

What are the tiers of data?

Answer 1

• Board level reporting
• Reporting to UW managers
• Operational data

Question 2

What is board level data?

Answer 2

Directors concerned with group performance/profitability, control of ‘downside risk’ and broad strategy
- Growth, LR, UW margin, business mix, exposure accumulations, competitive positioning, return on capital, solvency

Question 3

What is reporting to UW managers?

Answer 3

Monthly, trends over time
- Growth by product, retention, NB, lapses, LR, claim trends, large losses, rate changes, commission, expense ratio, market share, exposure accumulationsWh

Question 4

What is operational data?

Answer 4

Focus on day to day running and customer service
- NB, retention, rate increase, credit control, compliance contract certainty

Question 5

Why is claims data important?

Answer 5

Claims are the principal cost of production and helps with predictions for future loss pattern and the premium to cover it

Question 6

What will UW consider about claims data?

Answer 6

• Deterioration?
• No. claims up or down (large vs volume)
• ACPC up or down
• Cause of claims
• Large claims distorting?
• Reserves accurate?

Question 7

What is the personal injury discount rate?

Answer 7

TP receive lump sum, adjusted based on interest expected to achieve investing it - decided by courts
05 Aug 2019 amended to -0.25%, reviewed currently

Question 8

What is frequency vs severity?

Answer 8

How often vs how serious

Question 9

Effect of high frequency and low severity

Answer 9

law of large numbers, predictable, excess can accomodate

Question 10

Effect of low frequency and high severity

Answer 10

Difficult to predict as random nature, reinsurance to protect from this volatility

Question 11

What is the claims LR?

Answer 11

Relationship claims and premium
Claims incurred / premium received x 100%

Question 12

What is earned LR?

Answer 12

Where cover begins during the financial year so won’t have earned 100% of the premium
Calculated by comparing claims for period up to end of financial year with premiums earned

Question 13

What is outstanding LR?

Answer 13

Represents claims reported to insurers but not yet settled, doesn’t recognise that not all of the premium is earned yet

Question 14

What is a policy year used for?

Answer 14

Suitable for addressing performance of individual polices

Question 15

What is a UW year used for?

Answer 15

Used at account level with individual policy data group into UW years - focuses on claims trends

Question 16

What is the calendar year used for?

Answer 16

Claims (based on DOL) and premiums (portion of premium earned) from individual policies allocated to a calendar year

Question 17

What is the accounting year used for?

Answer 17

Used for decision making as a last resort