CAS Exam 5 Fall 2016, Question 22

Study guide: Exam 5

An actuary working at an insurance company is using a frequency-severity technique to estimate ultimate claims. The company made an effort to close claims more quickly starting in 2014. Given the following information:

Closed Claim Counts as of (months):

Paid Claims ($000s) as of (months):

Reported Claim Counts as of (months):

Reported Claims ($000s) as of (months):

• 48-Ultimate reported claim count factor = 1.03.
• 48-Ultimate closed claim count factor = 1.06.
• 48-Ultimate paid severity factor = 1.15.
• 48-Ultimate reported severity factor = 1.02.

Part a (0.5 points)

Determine whether evidence exists to support that claims are closing more quickly starting in 2014.

Part b (2.5 points)

Calculate an appropriate frequency-severity estimate of ultimate claims for accident years 2014 and 2015.

Answer this question and see the worked solution

Concepts tested

• Berquist-Sherman Method
• Settlement Rate
• Frequency-Severity Method
• Data Diagnostic Analysis

More questions from this set

• CAS Exam 5 Fall 2016, Question 21
• CAS Exam 5 Fall 2016, Question 23