Exam 6 - 1997 Exam Question 68

[teddybear]

Exam 6 - 1997 Exam Question 68

On all 10 manual 1, page 21, the solution for 1997 Exam Question 68:

Step 2: Compute paid and closed claim count link ratio


Why does the solution use the Reported Claim Count instead of Paid and Closed Claim count?

Anybody noticed? Thanks.

[J.T.]

Here was their response to me.

Thank you for your email and for bringing this to our attention.

The correct procedure for step 2 is to compute reported claim counts
excluding claims closed without payment. You can verify this by reviewing
pages 240-242 of Chapter 5: Loss Reserving. The ultimate counts appearing
at the bottom of page 242 come from those computed on page 240.

On page 238, Wiser et. al. discussed the importance of projecting net claims
excluding claims closed without payment.

The objectives of the average paid claim projection method and average
incurred claim projection method are the same. Both methods seek to
estimate ultimate losses as the product of projected ultimate average
severity times projected ultimate claim counts. Bias in the estimate of
projected ultimate claim counts is reduced by using reported claim counts
since they require "less of a levered development factor" than using paid
and closed claim counts.

Hope this helps. We apologize for any confusion this may have caused.

[teddybear]

Thanks a lot.

[Archen]

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