CAS Exam 5 Fall 2017, Question 23
Study guide: Exam 5
Given the following information for an insurance company as of December 31, 2016:
| Accident Year | Incremental Closed Claim Counts as of 48 months | 60 | 72 | 84 |
|---|---|---|---|---|
| 2010 | 60 | 25 | 15 | 5 |
| 2011 | 60 | 30 | 15 | |
| 2012 | 100 | 25 | ||
| 2013 | 80 |
| Accident Year | Incremental Paid Claims ($000) as of 48 months | 60 | 72 | 84 |
|---|---|---|---|---|
| 2010 | 1,400 | 2,500 | 2,000 | 400 |
| 2011 | 1,600 | 1,100 | 600 | |
| 2012 | 2,800 | 1,900 | ||
| 2013 | 2,100 |
- Selected annual severity trend = 5%.
- Trended tail severity at 72 months at the accident year 2016 cost level = $114,000.
- Trended tail severity at 84 months at the accident year 2016 cost level = $107,000.
Part a (1.5 points)
Calculate the trended tail severities at maturity ages 48 months and 60 months at the accident year 2016 cost level.
Part b (0.75 points)
Discuss at which maturity age the data should be combined for the purpose of selecting an incremental tail severity to be used in a frequency-severity method for this insurance company.
Answer this question and see the worked solution