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Old 05-04-2013, 12:22 PM
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Klaymen Klaymen is online now
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Instead of an EC game they need to have a find the SOA-GI traitor game.

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Old 05-06-2013, 11:54 AM
LittleGrass LittleGrass is offline
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Originally Posted by UCSDKID View Post
I have worked on this (or something like it) at a couple of companies. The answer really depends on what you are trying to accomplish and whether or not the reserves that are set will have any material impact on the policyholders.

If your goal is to improve (in your eyes) the adequacy of the aggregate case reserves (as well as establishing more consistent development patterns) then a table driven reserve process can accomplish this. One technique that we have used is to use your current estimates of ultimates and back into the average severity for open claims at various intervals. For example, take the ultimate losses for each year and subtract the paid loss at 12 months and then divide by open and IBNR claims at 12 months. This essentially gives you an average unpaid loss per open claim. Do this for a few accident years at each maturity (probably include some trend adjustments) and select what seems like a reasonable per claim estimate. Do this at each evaluation that you would want to step up the reserve at. At a company I worked for we adjusted the reserves every 90 days the claim remained open so we set up this method with quarterly evaluations.

I would be remiss to point out that the above method may produce a better aggregate case reserve but the claim specific reserves will likely be poorer than what a claims staff would produce since they consider the individual characteristics of each claim.

I would caution you against using such a technique though if the policyholder's premium is in some way experienced rated. For example, in workers compensation a part of the premium calculation is based on an experience modification factor which adjusts the premium for better or worse than expected performance. If you use a table driven approach then the individual claims may not be reserved as best as possible and it could lead to issues with policyholders (or regulators).

My two cents.
Thank you very much! This is helpful.
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Old 05-06-2013, 11:56 AM
LittleGrass LittleGrass is offline
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Originally Posted by Buck View Post
Setting case reserve is a claims function, not an actuarial function. However, actuarial often can help in many ways on this regard.

I think ideally, claims should set the case reserve based on the estimated ultimate settlement cost for the case and based on the information ascertained to that point.

How we do it is, I meet with the head of the claims every year and I give him a schedule of ultimate severities for each line based on our actuarial reserve reviews. Then, the claims department will set all initial case reserves based on my numbers. Initially, when there is no information on a case, the best case reserve at that point is the actuarial ultimate severity number. When claims investigate cases, claims will have better numbers down the road for each case, then they should come up with their own numbers.
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