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Actuarial: Exam 5 Reserving > Exam 5 Reserving: Information gathering > Flashcards

Exam 5 Reserving: Information gathering Flashcards

1
Q

Process of estimating unpaid claims

A
  1. Explore the data to identify key characteristics and possible anomalies. Balance data to other verified sources 2. Apply techniques for estimating unpaid claims 3. Evaluate the conflicting results of the various methods used 4. Monitoring projections of claim development over subsequent calendar periods
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2
Q

External data sources in US

A

ISO, NCCI, RAA, SFAA, AM Best, NAIC

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3
Q

External data sources in Canada

A

Best, GISA, IBC, RRC, MSA

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4
Q

When is external information particularly valuable

A

When selecting tail development factors, trend rates, and expected claim ratios (i.e. expected loss ratios)

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5
Q

Why IAA believes in entity-specific data over external data

A

Risk that external data maybe misleading or irrelevant due to differences relating to: insurance products, case outstanding and settlement practices, insurers’ operations, coding, geographic areas, and mix of business and product types

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6
Q

What should actuaries focus on when separating data into groups for an aalysis of unpaid claims

A
  1. Consistency of the coverage triggered by the claims in the group (which generally subject to similar laws,policy terms, claim handling)
  2. Volume of claims
  3. Length of time to report the claim
  4. Ability to develop an appropriate case outstanding
  5. Length of time to settle
  6. Likelihood of claim to reopen
  7. Average settlement value (i.e., severity)
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7
Q

What’s the goal of actuary in organizing data

A

Divide data into sufficiently homogeneous groupings without compromisingt he credibility of the data

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8
Q

credibility

A

predictive value given to a group of data

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9
Q

Types of data mostly used

A
  1. Incremental paid claims
  2. Cumulative paid claims
  3. Paid claims on closed claims
  4. Paid claims on open claims
  5. Case outstanding
  6. Reported claims
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10
Q

Types of data mostly used cont’d

A
  1. Incremental reported claims
  2. Reported claim counts
  3. Claim counts on closed with payment
  4. Claim count on closed with no payment
  5. Open claim counts
  6. Reopened claim counts
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11
Q

claim

A

claims + ALAE

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12
Q

DCC

A

defense and cost containment,

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13
Q

A&O

A

adjusting and other, include all claim adjusters costs

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14
Q

How to deal with unusually large claims

A
  1. exclude large claims from initial projection
  2. At the end of the unpaid claims analysis, add a case specific projection for the reported portion of large claims and a smoothed provision for the IBNR portion of large claims
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15
Q

What to consider when establishing the large claim threshold

A
  1. Number of claim over the threshold each year
  2. Size of claim relative to policy limits
  3. Size of claim relative to reinsurance limits
  4. Credibility of internal data regarding large claims
  5. Availability if relevant external data
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16
Q

How is deductible applied to third-party coverage

A

Deductible is after claim payment - insurer issues a payment to the injured party and then seeks recovery of the deductible from the insured

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17
Q

salvage

A

any amount that the insurer is able to collect from the sale of damaged property

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18
Q

subrogation

A

an insurer’s right to recover the amount of claim payment to a covered insured from a third-party responsible for the injury or damage

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19
Q

Three treatments of ALAE in excess of loss reinsurance contracts

A
  1. Included with the claim amount in determining excess of loss coverage (most common)
  2. Not included in the coverage
  3. Included on a pro rata basis: excess portion of claim to the total claim amount determines coverage for ALAE
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20
Q

Types of exposures

A

earned premium, written premium, policies in force, policy limits by region(early estimation of unpaid claims related to a natural catastrophe), number of vehicles insured (Personal automobile), and payroll (workers compensation)

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21
Q

Two ways to derive on-level premiums

A
  1. Re-rating of historical exposures at current rates
  2. Use a summary of rate level changes over the experience period and adjust the premiums in the aggregate for historical rate changes
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22
Q

Examples of exposure for self-insurers: workers compensation

A

payroll

23
Q

Examples of exposure for self-insurers: automobile liability

A

Number of vehicles or miles driven

24
Q

Examples of exposure for self-insurers: General liability for public entities

A

Population or operating expenditures

25
Q

Examples of exposure for self-insurers: General liability for corporations

A

Sales or square footage

26
Q

Examples of exposure for self-insurers: Hospital professional liability

A

Average occupied beds and outpatient visits

27
Q

Examples of exposure for self-insurers: property

A

property values

28
Q

Examples of exposure for self-insurers: crime

A

number of employees

29
Q

provision

A

unpaid claim estimates

30
Q

Data verification concerns

A
  1. Consistency with financial statement data
  2. consistency with prior data
  3. Data reasonableness
  4. Data definitions
31
Q

Key dates for the organization of the claim data

A
  1. Policy effective dates 2. Accident date 3. Report date 4. Accounting date 5. Valuation date
32
Q

Policy effective dates

A

The period for which the policy triggered by the claim was effective

33
Q

Policy year

A

the year that the policy became effective

34
Q

Policy date for reinsurer

A

Underwriting date (or year)

35
Q

notification date

A

the date that the insurer is put on notice that an event occurred that may result in a claim

36
Q

sequence of notification, report and record date

A

notification, report, record

37
Q

accounting date

A

date that defines the group of claims for which liability may exist, namely all incurred claim incurred on or before the accounting date

38
Q

valuation date

A

date through which transactions are included in the database used in the evaluation of the liability, regardless of when the actuary performs the analysis

39
Q

calendar year data

A

transaction data. Calendar year 2008 paid claim s refer to the claim payments made by the insurer between Jan 1, 2008 and Dec 31, 2008

40
Q

Calendar year earned premium

A

Written premium + Beginning Unearned Premium Reserve - Ending Unearned Premium Reserve

41
Q

Advantage of calendar year data

A
  1. no future development, the value remains fixed and does not change as time goes by
  2. It is readily available
42
Q

Disadvantage of calendar year data

A

Inability to address the critical issue of development

43
Q

Accident year data

A

claims grouped according to the data of occurence

44
Q

policy year data

A

year in which the policy was written

45
Q

Underwriting year data

A

frequently used by reinsurers, claims data grouped by the year in which the reinsurance policy became effective

46
Q

policy provisions

A

e.g. policy limits and deductibles

47
Q

development triangle

A

a table that shows changes in the value of various cohorts over time

48
Q

Analysis of triangles

A

Rows corresponding to the experienced period and columns representing the maturity maturity ages

49
Q

How will development factors change as the retention increases?

A

Increase

50
Q

When the development technique is not useful?

A

Changes to the insurer’s operations, environmental changes which changes the assumption that the past will be predictive of the future
Large volume of historical claims might distort the data

51
Q

Examples of changes to the insurer’s operations

A
  1. New claims processing systems
  2. Revisions to tabular formulae for case outstanding
  3. Changes in claims management philosophy
  4. Policyholder deductibles
  5. Insurer’s reinsurance limits
52
Q

environmental changes

A

e.g. when a major tort reform occurs (such as a cap on claim settlements or a restriction in the statute of limitations)

53
Q

Is development techniques used when an insurer entering a new line of business of a new territory and for small insurers

A

Yes. though they rely more on benchmark patterns (e.g. comparable lines of business or available industry data) to select claim development factors

54
Q

Should actuaries still apply the development techniques in highly leveraged cumulative claim development factors

A

No. Actuaries would seek alternative techniques for estimating unpaid claims

Actuarial: Exam 5 Reserving (6 decks)

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