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Which technique addresses changes in the case reserving practices over time?
Berquist-Sherman Technique.
Which technique relies primarily on historical loss development factors?
Development Technique.
Explanation: Relies on historical claim data to estimate unpaid claims.
In the Expected Claims Technique, if actual claims are more than expected claims, it indicates ________?
Underestimation of the initial expected loss ratio.
Explanation: If actual claims exceed expected, the initial loss ratio was likely underestimated.
For short-tailed lines of business, which technique might be preferred due to its simplicity?
A) Bornhuetter-Ferguson
B) Development
C) Cape Cod
D) Berquist-Sherman
B) Development.
Explanation: For lines where claims are reported and settled quickly, the Development Technique might be preferred.
Which of the techniques explicitly addresses salvage and subrogation?
Recoveries: Salvage and Subrogation Technique. Explanation: This method estimates recoveries from third parties.
In the Bornhuetter-Ferguson method, what external information might be used?
Initial expected loss ratio.
Explanation: This a priori knowledge is essential for the Bornhuetter-Ferguson approach.
When might the Berquist-Sherman Techniques be less appropriate?
When there have been consistent case reserving practices.
What does the Development Triangle represent?
Claims data arranged by accident year and development year. Explanation: Shows how claims mature and develop over time.
What is the primary advantage of using the Cape Cod Technique over the pure Bornhuetter-Ferguson?
It determines the initial expected loss ratio based on actual data. Explanation: Uses actual data to estimate the initial loss ratio.
How does the Frequency-Severity Technique differ from the pure Development Technique?
It separates the number of claims from the size of each claim. Explanation: Distinguishes between aggregate claims and claim occurrence and amount.
Reinsurance can be described as ________?
Insurance for insurers. Explanation: Allows insurance companies to transfer risks to other parties.
Which technique can be described as a hybrid between the Expected Claims Technique and the Development Technique?
Bornhuetter-Ferguson Technique. Explanation: Combines elements of both the Expected Claims and Development Techniques.
Which of the following techniques requires an actuary to adjust raw claim data before applying development factors? A) Cape Cod B) Frequency-Severity C) Berquist-Sherman D) Expected Claims
C) Berquist-Sherman. Explanation: Requires adjustments to raw data.
Why might actuaries meet with management as part of the claim estimation process?
To gain insight into business practices. Explanation: Management provides context that can’t be derived from data.
In which technique might salvage and subrogation be most directly addressed?
Recoveries: Salvage and Subrogation Technique. Explanation: Estimates recoveries from third parties.
