Schedule P AAO calculation

[frummie]

Top of Page 18 in Feldblum Schedule P article:

The "Revised Method" of AAO distribution uses a weighting of:

claims reported
closed with payment
outstanding and
closed without pay.

Schedule P part five has the first three. Feldblem says closed without payment calculation is

reported - outstanding at year end - closed with payment

How does this work for prior year line? For my company, one line of business has the following for prior years:

27 closed with pay
200 outstanding claims
96 reported claims.

How do you calculate closed without pay?

Thanks,

frummie

[Talking Goat]

I question that Exhibit on page 18.

Normally, you have to view claim counts as they come in and as they go out. ie, Reported vs Open/Closed.

You can't do this on a year-by-year basis, b/c of the timing differences. But overall,
Total # clms Reported = (Total # clms Closed w/ Pay) + (Total # clms Closed w/o Pay) + (# Clms Still outstanding)

In that exhibit, we have:
1300 Clms Rptd
900 Closed w/ Pay
200 Closed w/o Pay
500 Still Open (as of 12/31/09)

Best I can tell, the above formula would produce:
1300 = 900 + 200 +500 = 1600, which does not tie out.

I'd argue that there should be only 200 claims Outstanding (as of 12/31/09).

Let me know if I'm missing something here.

[Da Bears!]

I question that Exhibit on page 18.

Normally, you have to view claim counts as they come in and as they go out. ie, Reported vs Open/Closed.

You can't do this on a year-by-year basis, b/c of the timing differences. But overall,
Total # clms Reported = (Total # clms Closed w/ Pay) + (Total # clms Closed w/o Pay) + (# Clms Still outstanding)

In that exhibit, we have:
1300 Clms Rptd
900 Closed w/ Pay
200 Closed w/o Pay
500 Still Open (as of 12/31/09)

Best I can tell, the above formula would produce:
1300 = 900 + 200 +500 = 1600, which does not tie out.

I'd argue that there should be only 200 claims Outstanding (as of 12/31/09).

Let me know if I'm missing something here.
I beileve that exhibit shows INCREMENTAL values for everything. So, for example, the 275 reported for AY 20X8 means there were 275 claims reported during 20X9 that occured during AY 20X8. 275 is not the cumulative number of reported claims.

Also, I don't know where you're getting your numbers from. The "Total" line shows

1300 Reported
900 Closed w/pay
200 Closed w/o pay
1700 Outstanding

The 20X9 line shows

800 Reported
200 Closed w/pay
100 Closed w/o pay
500 Outstanding

These numbers DO tie up, because for only one year, the incrementals = cumulative.

[Talking Goat]

I was looking at this wrong. The Exhibit shows 2009 Calendar Year activity, sorted by Accident Year.

So indeed only the 2009 Accident Year will tie out for Reported claims vs Closed/Open claims.

[frummie]

Back to my original post, question:

For my company, one line of business has the following for prior years row in Schedule P part 5:

27 closed with pay from Schedule P Part 5 Section 1
200 outstanding claims from Schedule P Part 5 Section 2
96 reported claims from Schedule P Part 5 Section 3

How do you calculate closed without pay?

If I do it like the formula on page 18, reported - outstanding at year end - closed with payment

I get 96-202-27 = -133. This doesn't seem right. Do I ignore outstanding?

[Da Bears!]

My guess is that you don't even try to calculate those numbers for prior years, since the prior years row is always incremental, whereas the individual years show the cumulative amounts. To do the calculation for the prior years rows, you would need at least the A/S from last year and probably even older ones.

[frummie]

If they do ask this on the exam, I expect the prior years CWOP will be given then. Thanks!