CAS Exam 5 Spring 2016, Question 23
Study guide: Exam 5
The following information is available as of June 30, 2015 for an insurance company:
Cumulative Paid Claims ($000s) as of (months):
| Accident Year | 6 | 18 | 30 | 42 |
|---|---|---|---|---|
| 2012 | 3,450 | 4,313 | 4,528 | 4,573 |
| 2013 | 3,200 | 4,000 | 4,200 | |
| 2014 | 3,345 | 4,181 | ||
| 2015 | 2,950 |
Cumulative Paid ALAE ($000s) as of (months):
| Accident Year | 6 | 18 | 30 | 42 |
|---|---|---|---|---|
| 2012 | 173 | 345 | 498 | 549 |
| 2013 | 160 | 320 | 462 | |
| 2014 | 167 | 335 | ||
| 2015 | 148 |
- There is no development beyond 42 months.
Part a (2.25 points)
Estimate the total ultimate unpaid ALAE for all accident years using a paid ALAE-to-paid claims only development technique.
Part b (0.5 points)
This insurance company expects a significant change in their mix of business that will impact accident years 2015 and later. Briefly describe one advantage and one disadvantage of using the paid ALAE-to-paid claim only technique during this change in mix of business.
Answer this question and see the worked solution