CAS Exam 5 Spring 2017, Question 16
Study guide: Exam 5
Given the following information for a private passenger auto insurer as of December 31, 2016:
| Accident Year | Selected Ultimate Claim Counts | Earned Premium ($000) | Premium On-Level Adjustment Factor to 2016 |
|---|---|---|---|
| 2012 | 1,025 | $132,500 | 1.405 |
| 2013 | 3,070 | $275,250 | 1.300 |
| 2014 | 2,950 | $330,750 | 1.070 |
| 2015 | not provided | $360,825 | 1.050 |
- Annual claim count trend = -2%.
- Annual severity trend = 5%.
- Accident year 2016 selected ultimate severity = $13,370.
- Accident year 2015 cumulative reported claims as of December 31, 2016 = $30,880,900.
Part a (2.25 points)
Estimate the IBNR for accident year 2015 as of December 31, 2016 using a frequency-severity technique.
Part b (0.5 points)
Briefly describe one situation where the frequency-severity techniques are useful and one situation where they are not useful.
Answer this question and see the worked solution