Exam 5 Development Technique Flashcards
7 steps to develop triangle
- Compile claims data in a development triangle
- Calculate age-to-age factors
- Calculate averages of the age-to-age factors
- Select claim development factors
- Select tail factor
- Calculate cumulative claim development factors
- Project ultimate claims
Techniques for average of age-to-age factors
- Simple (or arithmetic) average
- Medial average (average excluding high and low values)
- Volume-weighted average
- Geometric average
What characteristics does actuaries review in claim development factors
- Smooth progression of individual age-to-age factors and average factors across development periods
- Stability of age-to-age for the same development period
- Credibility of the experience
- Changes in patterns
- Applicability of the historical experience
Approaches to evaluate the tail factor
- Industry benchmark development factors
- Fit a curve to the selected or observed development factors to extrapolate the tail factors
- Used for paid development where the comparable reported development is already considered to be at ultimate, is to utilize reported-to-paid ratios at the latest observed paid development period
CDF
Cumulative Development Factors, project the total growth over the remaining valuation. aka age-to-ultimate factors and claim development factors to ultimate
2 Ways to calculate IBNR
projected ultimate claims - reported claims, or , total unpaid claims - case outstanding
reporting pattern of claims
percentage of ultimate claims that are reported in each year
immature vs. mature
Actuaries refer to the most recent, less-developed accident year as immature;
Oldest, most-developed accident year as mature