Friedland Chapter 3

STUDY
PLAY
7 characteristics for separating data into groups for an analysis of unpaid claims
Consistency of the coverage triggered by the claims in the group, volume of claim counts in the group, length of time to report the claim once an insured event has occurred, ability to develop an appropriate case outstanding estimate from earliest report through the life of the claim, length of time to settle the claim once it is reported, likelihood of claim to reopen once it is settled average settlement value.
5 considerations for establishing large claim threshold
Number of claims over the threshold each year, size of claim relative to policy limits, size of claim relative to reinsurance limits, credibility of internal data regarding large claims, availability of relevant external data
3 possible treatments of ALAE
Included with the claim amount in determining excess of loss coverage, not included in the coverage, included on a pro rata basis; the ratio of the excess portion of the claim to the total claim amount determines coverage for ALAE.
4 components to data verification
Consistency with financial statement data, consistency with prior data, data reasonableness, data definitions.
Policy effective dates
Beginning and ending dates of the policy term.
Accident date
Date that the accident or event occurred that triggered the potential policy coverage.
Report date
Date on which the claim was reported to the insurer and recorded in its claims system.
Accounting date
Date that defines the group of claims for which liability may exist.
Valuation date
Date through which transactions are included in the database used in the evaluation of the liability.
2 advantages of calendar year (transactional) data
No future development, readily available.
Disadvantages of calendar year (transactional) data
Inability to address the critical issue of development.
Accident year data
Claims grouped according to the date of occurrence.
3 advantages of accident year data
Easy to achieve and easy to understand, represents claims occurring over a shorter time frame than for the policy year or underwriting year aggregation, tracking claims is valuable when there is change due to economic or regulatory forces or major claim events which can influence claims experience.
Disadvantage of accident year data
Potential mismatch between claims and exposures for insurers.
Policy year data
Claims organized according to the year in which the policy was written.
Underwriting year data
Claims data grouped by the year in which the reinsurance policy became effective.
Advantage of policy or underwriting year data
Directly matches the premiums and claims arising from a given block of policies.
Disadvantage of policy or underwriting year data
Extended time frame.
Report year data
Claims grouped according to the date of report to the insurer.
Advantage of report year data
More stable data and more readily determinable development patterns than an accident year approach in which the number of claims is subject to change at each successive valuation.
Disadvantage of report year data
Only measures development on known claims and not pure IBNR. Pure IBNR is frequently the more difficult part of the total unpaid claims estimate to determine.