4 things you adjust losses for?

[Gareth Keenan]

This one's been nagging me at the back of my mind, but what did you guys put for the problem that asked for four adjustments to losses?

I feel like this was one I missed from a the study materials because I just didn't recall the source or the answer or the list. I ended up puting down the following

1) Adjustments for development of losses, which brings losses from their present value to ultimate.
2) Adjustments for changes in the average frequency or severity of losses which are continuous and gradual changes and bring losses from their historical value to present. i.e. how much would the same losses from 2 years ago cost today for the same loss events(maybe a little redundant)
3) Changes for shifts in contractual terms like changing deductibles, limits, or coinsurance provisions.
4) Adjustments for expected and historical shifts in the distribution of business.

That's the short version of what I put, but don't recall if that was correct.

What did you guys put? Was there a correct response?

Cheers,

Gareth Keenan

[illiniActuary]

agree with 1,2, and 3.

4 should be adjustment for extraordinary losses (like the one they had us do in 27)

[Vorian Atreides]

1) Extraordinary losses:
(a) Large individual losses (or shock losses) should be capped and a shock provision introduced if the loss is expected to occur again or be removed if it's not expected to reoccur;
(b) Catastrophic losses should be removed in replaced with a cat provision (or long-term average cat loss);
(c) Reinsurance recoveries if not treating this as an expense (net cost of reinsurance);

2) Adjustments for changes in benefits or coverage levels;

3) Developed to ultimate levels;

4) Trended to prospective cost levels.

W&M starting on page 93 . . . I just picked out the bold italicized headings.

[Vorian Atreides]

btw, I think your #2 and #4 might be viewed as explicit details of #1. I would guess that you might get some credit (if not most) for them . . . but it'll depend on what the graders are looking for overall for this problem.

[MsMars]

I think your #2-4 are the same thing which is trending.

I believe it should go like this:
1. Adjust for extraodinary losses
2. Restate to projected benefit level
3. Develop to ultimate
4. Trend

But you probably will still get half of the credit.

[rj_rattigan]

I think your #2-4 are the same thing which is trending.

I believe it should go like this:
1. Adjust for extraodinary losses
2. Restate to projected benefit level
3. Develop to ultimate
4. Trend

But you probably will still get half of the credit.

Thats what I put. This list is from WM ch6.

[booyah81]

Thats what I put. This list is from WM ch6.

ditto