- TIA EXAM 5 - WERNER CH 03.txt

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jenielwu
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135402
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- TIA EXAM 5 - WERNER CH 03.txt
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2012-02-14 23:10:58
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tia
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exam 5a
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  1. What is a Ratemaking Review?
    • 1. Analyze adequacy of existing rates
    • Generally use internal or industry historical data to project future costs
    • Company should collect and maintain relevant and consistent historical data
    • 2. Pricing new products
  2. What should you do when ratemaking data is limited?
    • Must be aware of the impact on the analysis
    • Should examine how sensitive the results are to various assumptions
    • Select data that minimizes distortions in results
  3. What should you review internal data for?
    • 1. Appropriateness for the intended purpose of the analysis
    • 2. Reasonableness and comprehensiveness of the data elements
  4. What kind of Risk Data is used for Ratemaking?
    Use Policy database and Claims database

    Need to link policy exposure and premium with corresponding claims and losses
  5. Describe the Accounting information needed for Ratemaking
    • 1. May not even be speci fic to one line of business
    • 2. Expenses that fall into this category
    • *Underwriting expenses - incurred in acquisition and servicing of policies
    • *ULAE
  6. What three objectives apply to Data Aggregation?
    • 1. Accurately match losses and premium for the policy
    • 2. Use the most recent data available
    • 3. Minimize data collection and retrieval costs
  7. Aggregation by Calendar Year

    Name Type, Use, Advantages & Disadvantages
    • 1.Type: Transactional data
    • CY = PAID + END CASE - BEG CASE

    • 2.Primary use:
    • Aggregation of exposures
    • May be used for LOBs or coverages in which losses are reported and settled quickly

    • 3.Advantages:
    • No future development - the value remains fi xed and doesn't change over timeReadily available - most financial reporting on a calendar year basis

    • 4. Disadvantages:
    • Mismatch in timing between premium & losses
    • *Earned premium comes from policies in force during the year
    • *Losses may come from payments or reserve changes on policies from previous years
  8. Aggregation by Accident Year

    Name Type, Advantages & Disadvantages
    • 1. Type: Losses grouped according to date of occurrence, regardless of when pol written or claim reported.
    • AY = PAID + ENDING CASE

    Will develop over successive CYs with more information and as new claims are reported

    Most common grouping of claims data for the actuarial analysis of unpaid claims

    2. Advantages:Better match of premium and losses than calendar year

    • 3. Disadvantages:
    • Must estimate future development on claims
    • May select valuation date several months after end of year to improve estimate because allows some time for loss emergence
  9. Aggregation by Policy Year or Underwriting Year

    Name Type, Advantages & Disadvantages
    • 1. Type: Group premiums and losses by year in which policy was written
    • Losses arising from a PY can extend over a 24-month calendar period

    2. Advantages: True match between claims and exposures

    3. Disadvantages: Extended time frame - data takes longer to develop
  10. Aggregation by Report Year

    Name Type, Use, Advantage
    • 1. Type: Group claims according to date of report to the insurer
    • Claims-made coverage is dependent on the report date

    2. Advantages: Number of claims is fi xed at close of the year
  11. Overall versus Classi fication Analysis
    • Overall analysis
    • Reviewing the adequacy of the overall rate level
    • Data can be highly summarized

    • Classi cation analysis
    • Data must be at a more detailed level
  12. Sometimes the desired data for analysis is unavailable, how do you deal with this?
    • Must work with available data and use actuarial judgment to deal with data de ficiencies
    • E.g., if missing earned premium by territory, may use in force premium by territory to estimate
  13. External Data
    • Statistical Plans
    • Other Aggregated Industry Data
    • Competitor Rate Filings/Manuals
    • Other Third-Party Data
  14. What are Statitical Plans?
    Regulators often require insurers to file statistical data, usually in a summary form

    • In order to comply with various state requirements, industry service organizations formed to:
    • 1.Aggregate & Collect data
    • 2.Analyze data and make available to participating companies
    • 3.Collect data at transactional level
  15. What is meant by Other Aggregated Industry Data & give some examples?
    Many insurers voluntarily report data to various organizations

    To be used by insurance industry, regulators, public policy makers or general public

    • e.g. Fast Track Monitoring System
    • * Used by insurers and regulators to analyze loss trends
    • Highway Loss Data Institute
    • * Loss information by type of car to member companies and public policy makers
  16. Competitor Rate Filings/Manuals
    Rate filings available to the public when required to be filled with regulators

    • Must take great care when using competitive information:
    • * each company has different types of:
    • insureds
    • goals
    • expenses
    • operating procedures

    May not be useful info if differences are material
  17. Other Third-Party Data
    • 1. Economic Data
    • a. used for trends in expenses, premiums, losses
    • b. Consumer Price Index for medical cost and construction cost indices

    • 2. Geo-demographic data
    • a. Census data - population density to predict freq
    • b. Weather indices, avg miles driven

    • 3. Other third-party data
    • a. Credit score, DMV records, fire station distance

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