CAS Exam 5 Fall 2015, Question 21
Study guide: Exam 5
Given the following information:
Cumulative Reported Claim Counts:
| Accident Year | 12 Months | 24 Months | 36 Months |
|---|---|---|---|
| 2012 | 500 | 750 | 1,000 |
| 2013 | 575 | 865 | |
| 2014 | 800 |
Cumulative Closed Claim Counts:
| Accident Year | 12 Months | 24 Months | 36 Months |
|---|---|---|---|
| 2012 | 300 | 500 | 875 |
| 2013 | 350 | 800 | |
| 2014 | 750 |
- Assume no reported development after 36 months.
Part a (1.5 points)
Based on disposal rates, assess the appropriateness of using a Berquist-Sherman paid claims development adjustment.
Part b (0.5 points)
Given the additional information below, discuss a possible distortion when using the Berquist-Sherman paid claim development adjustment.
Unadjusted Paid Claims Severity on Closed:
| Accident Year | 12 Months | 24 Months | 36 Months |
|---|---|---|---|
| 2012 | $24,000 | $34,667 | $35,657 |
| 2013 | $26,087 | $28,142 | |
| 2014 | $16,111 |
- Assume no partial payments.
Answer this question and see the worked solution