CAS Exam 5 Spring 2015, Question 21
Study guide: Exam 5
Given the following data as of December 31, 2014:
Cumulative Closed Claim Counts:
| Accident Year | 12 months | 24 months | 36 months |
|---|---|---|---|
| 2012 | 730 | 800 | 820 |
| 2013 | 750 | 825 | |
| 2014 | 775 |
Cumulative Paid Claims ($000):
| Accident Year | 12 months | 24 months | 36 months |
|---|---|---|---|
| 2012 | 2,250 | 2,600 | 2,700 |
| 2013 | 2,600 | 3,000 | |
| 2014 | 2,000 |
| Accident Year | Ultimate Claim Counts |
|---|---|
| 2012 | 820 |
| 2013 | 846 |
| 2014 | 874 |
- The latest diagonal is representative of current claim adjusting practices.
- There is no development beyond 36 months.
- Annual severity trend is 4%.
Part a (2 points)
Using the disposal rate frequency-severity technique, calculate the ultimate claims.
Part b (0.5 points)
Assume accident year 2013 experienced a one-time increase in the severity of claim payments with no impact on frequency or disposal rates. Briefly discuss two adjustments to the disposal rate frequency-severity technique that would be appropriate in this scenario.
Answer this question and see the worked solution