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  1. Changes in Product Mix -> greater % of CL vs PL causes Cape Cod Method to over, under or accurately state IBNR?
    Method understates IBNR

    • 30% rate inc for CL, 5% for PL
    • Increasing CL in BOB
  2. What are 3 common uses of Freq-Severity Technique
    • 1. Used with AY, PY, RY & CY data
    • 2. Appropriate for all lines of insurance (most often used with long-lines)
    • 3. Freq-Sev methods often refer to ult clm x ult sev without direct use of exposure (even if there is one in def)
  3. What could cause lower closed-to-reported at Dec 31?
    • Higher # clms rpted at begining of winter season
    • Less time to process Nov & Dec winter claims by year end
    • **Must consider this since causes differences in age-to-age factor selection
  4. Name 2 reasons why/how we get negative IBNR?
    • salvage and subrogation recoveries
    • conservative case reserves
  5. List the 4 steps of the Freq-Sev Approach #1 - Dvt tech with CC & Severities
    • 1. Project and Select ult Claim Counts
    • 2. Project Ult Severity
    • 3. Project Ult Claims
    • 4. Develop unpaid claim estimate
  6. List the 5 steps of the Freq-Sev Approach #2 - Incorporate exposures and inflation
    • 1. Project and Select ult Claim Counts
    • 2. Compare ult claimcounts to exposures and select freq
    • 3. Project Ult Severity
    • 4. Project Ult Claims
    • 5. Develop unpaid claim estimate
  7. List the 7 steps of the Freq-Sev Approach #3 - Disposal Rate Technique
    • 1. Project ult claim counts & select ult claim counts by AY
    • 2. Develop disposal rate triangle and select disposal rate by maturity age
    • 3. Project claim counts by AY and maturity (complete the square)
    • 4. Analyze severities and select severity by maturity
    • 5. Calculate severity by maturity age and AY (complete square)
    • 6. Multiply CC by severity to determine projected claims
    • 7. Determine unpaid claim estimate
  8. Describe the trend selection process when adjusting severity to common time period
    • Common to use exponential regression analysis: implies constant % increase in inflation
    • May also use wtded exponential least squares to give more weight to recent years
    • Linear proj used rarely: implies decreasing % trend
    • Run many GOF on regression
    • Only a few data points not meaningful
  9. Why would one see variability in severities and what would you do about it?
    Combine experience of several maturity ages

    • Results from:
    • 1. 1 or more large claims closed at older age
    • 2. Often related to smaller # of claims in data set at older maturities
    • 3. Combining data may limit influence of these factors
  10. Name 3 considerations for the selection of maturity age to combine data
    • Age at which results become eratic
    • Influence on total projections of selecting a particular age
    • % of claims expected to be closed beyond selected age
  11. Name another use for the Freq-Sev Projection, other than an estimate on its own
    Projected Ult Clms from Freq-Sev technique is often valuable as an alternative expected claims estimate for BF

    Actuary may feel more comfortable with this than expected claims ratio
  12. Name 2 enhancements for Freq-Sev Technique
    • Seasonality on freq & sev
    • inflation
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