Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Exam 6 > Odomirok 15 > Flashcards

Odomirok 15 Flashcards

1
Q

List some uses of Schedule P (in addition to being used by outside parties to assess the reserve adequacy)

A
  • Supports and provides disclosure for the SAO
  • Shows how reserves have developed over time, and indicates where the development is coming from
  • Provides the source of payment patterns to be used in the tax discounting calculations
  • Shows the split between case reserves and IBNR
  • Provides historical claim count data to help review trends in frequency & severity, and chances in the claims handling and reserving
  • Provides the data to calculate the RBC loss sensitive discount
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

List the parts of Schedule P

A

Part 1. Loss & LAE experience as of 12/31 of the current year.
Part 2. Historical net loss & DCC estimates
Part 3. Historical net paid loss & DCC
Part 4. Historical net IBNR for loss & DCC (before tabular discount)
Part 5. Historical claim counts (closed with payment, open and reported)
Part 6. Historical earned premium
Part 7. Loss and premium data on loss sensitive contracts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How are losses in Part 1 grouped

A
  • Occurrence policies: AY
  • Claims made policies: RY
  • Tail policies: PY
  • Fidelity & surety policies: Discovery year
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

2 components of LAE

A
  1. Defense & cost containment (DCC)

2. Adjusting and other (A&O)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

List some examples of DCC

A
  • Surveillance expenses
  • Fixed amounts for medical cost containment
  • Litigation management expenses (eg audit of bills)
  • LAE for pools, if reported by AY
  • Fees & salaries for appraisers, private investigators, hearing representatives, reinspectors, fraud inspectors; if working in defense of a claim
  • Fees & salaries for rehabilitation nurses (if not included in losses)
  • Attorney fees incurred due to duty to defend
  • Cost of engaging experts (if not included in losses)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

List some examples of A&O

A
  • Fees of adjusters & settling agents
  • LAE for pools, if reported by CY
  • Fees & salaries for appraisers, private investigators, hearing representatives, reinspectors, fraud inspectors; if working in the capacity of an adjuster
  • Attorney fees incurred in determination of coverage
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How was LAE historically segmented

A
  • Allocated Loss Adjustment Expenses (ALAE): expenses that can be allocated to a specific claim
  • Unallocated Loss Adjustment Expenses (ULAE): Expenses that can not be allocated to individual claims
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How are S&S expenses recorded

A
  • Paid losses are recorded net of S&S received

- Unpaid losses are recorded net of anticipated S&S (in the bulk & IBNR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How are tabular & non tabular discounts treated in part 1

A
  • Net of tabular discount

- Gross of non tabular discounts (until columns 32 & 33) and net (in columns 35 & 36)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

List 2 things that the claim count data from schedule P can be used to identify/analyze

A
  1. Changes in losses

2. Changes in claims settlement or reserving philosophy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What types of changes should actuaries look out for, when analyzing trends

A
  • Mix of business (type of exposure, geography)
  • Policy limits
  • Reinsurance attachment points & limits
  • The way that the company counts its claims
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How is discounting reflected in parts 2-4?

A

Data is gross of all discounting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Issues with using the information in parts 2 to 4 to develop losses

A
  • Various allocations in the creation of Schedule P are based on the interpretation of the person completing it
  • Internal pooling or reinsurance arrangements that may have an impact on the data set may not be very obvious by looking exclusively at schedule P
  • Schedule P includes business from participation in voluntary and involuntary pools and/or associations: many of these pools record IBNR as case reserves/the level of participation in the pool may have changed over time
  • Schedule P only contains 10 AYs of data, but long tail lines may experience development later than 10 years
  • Commutations will distort the reserves
  • The data combines losses and DCC, potentially hiding trends in either component
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What changes should be considered when using information in parts 2 to 4 to develop losses

A
  • Retentions
  • Claims settlement and reserving
  • Business mix
  • Underlying exposures
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Formula to populate the right most column of the prior years row of part 3

A

From part 1:

D&A loss - ceded loss + D&A DCC - ceded DCC = Col 4 - 5 + 6 - 7

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

3 sections of part 5

A
  1. Cumulative number of claims closed with loss payment
  2. Number of claims outstanding
  3. Cumulative number of claims reported
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What inconsistency should users be aware of when comparing part 5 data of different companies

A

Some companies record counts on a per claim basis, whereas others record them on a per claimant basis

18
Q

List some metrics that can be derived from the claim count data (in addition to other data from the Annual Statement)

A
  • Claim closure rates
  • CWP ratios
  • Claim frequency
  • Avg claim severity
19
Q

Formula for closure rate

A

Closed claims/total reported claims

20
Q

2 advantages of closing claims early

A
  1. Minimize chance that the claim will develop adversely

2. Allow insured to receive medical treatment/repair property damage/recover from loss

21
Q

3 reasons that settlement rates may reduce

A
  1. Reduction in staff
  2. Growth in the book without a corresponding increase in staff
  3. Surge in claims from a catastrophe
22
Q

Expected impact to ultimate loss projection if a slow down in settlement rates is not reflected

A

This will result in an understated projection

23
Q

CWP ratio equation

A

CWP claims/total closed claims

24
Q

Claims frequency equation

A

Claim counts (from part 5) divided by EPs (from part 1)

25
Q

Average claim severity formula

A

Net paid loss & DCC (from part 3)/ direct and assumed claims closed with payment (from part 5, section 1)

26
Q

Average case outstanding severity formula

A

Net case outstanding loss and DCC (part 2 - 3 -4)/direct and assumed open counts (part 5, section 2)

27
Q

Average reported claim severity formula

A

Net reported loss & DCC (from part 2-4)/direct and assumed reported counts (part 5, section 3)

28
Q

Factors that may cause loss trends

A
  • Inflation
  • Law changes
  • One time catastrophic claims
  • Changes in deductible/retentions
  • Internal factors
29
Q

List some metrics that can be calculated from the part 5 data to perform reasonableness checks to the unpaid claim estimates (by comparing actual to expected)

A
  • Average claim frequency = Ultimate claim count by AY/corresponding EP
  • Average ultimate severity = Ultimate loss and DCC by AY/Ultimate claim counts
  • Average unpaid claim severity = Unpaid loss and DCC by AY/Unpaid claims
30
Q

List some reasons that premiums in part 6 may change over time

A
  • Premium audits
  • Retrospective rated policies
  • Lags in reporting/accounting for premiums
31
Q

When would an insurer populate part 7

A

Only if it using the loss sensitive adjustment to RBC

32
Q

List the 2 parts of part 7

A

Part A: Primary contracts (direct business)

Part B: Reinsurance contracts (assumed business)

33
Q

List the five sections of each part of part 7

A

Section 1: Net loss & LAE unpaid and NWP on loss sensitive contracts, relative to all contracts, for each sched P line
Section 2: Incurred loss & DCC on loss sensitive contracts, in the same format as part 2
Section 3: Loss & DCC IBNR on loss sensitive contracts, in the same format as part 4
Section 4: Net earned premiums on loss sensitive contracts, in the same format as part 6
Section 5: Triangle of net reserves for premium adjustments & accrued retrospective premiums for each of the last ten years that the policies were issued

34
Q

Briefly describe the schedule P interrogatories

A

Series of seven questions that the insurer needs to answer, that add insight to the other information reported in sched P

35
Q

What topics does Interrogatory 1 cover?

A

Extended reporting endorsements (EREs) arising from death, disability or retirement (DDR). There are six parts:

  • The first asks whether the insurer offered the endorsement for free (or at a reduced rate)
  • The remaining parts are about how the company reports the DDR
36
Q

Main purpose of interrogatory 1

A

Ensure that the ERE coverage has been reserved for

37
Q

What topics does interrogatory 2 cover?

A

Asks if the LAE is being defined as DCC and A&O

38
Q

What topics does interrogatory 4 cover?

A

Asks for disclosure about whether the reserves are net of non-tabular discounts

39
Q

What topics does interrogatory 6 cover?

A

Whether the insurer reports claim counts per claim or per claimant

40
Q

What topics does interrogatory 7 cover?

A

Asks if there are any changes or anything special that the user needs to be aware of if she relies on the schedule P data to assess the adequacy of recorded loss & LAE reserves

Exam 6 (46 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions