CAS Exam 5 Spring 2018, Question 23
Study guide: Exam 5
Given the following information as of December 31, 2017:
| Calendar Year | Paid ULAE ($) | Paid Claims ($) | Incurred Claims ($) |
|---|---|---|---|
| 2014 | 25,000 | 62,500 | 250,000 |
| 2015 | 50,000 | 250,000 | 500,000 |
| 2016 | 75,000 | 500,000 | 750,000 |
| 2017 | 90,000 | 600,000 | 900,000 |
Accident Year 2017
| $150,000 | Case outstanding |
| $100,000 | Total IBNR |
| 60% | Percent of total IBNR attributed to future case development on known claims |
Part a (1.25 points)
Estimate unpaid ULAE for accident year 2017 using the classical technique where 100% of the paid to paid ratio is applied only to the claims incurred but not yet reported (IBNYR). Briefly justify the selected ULAE ratio.
Part b (1 point)
Estimate unpaid ULAE for accident year 2017 using the Kittel refinement where 100% of the paid to paid ratio is applied only to the IBNYR.
Part c (0.5 points)
Identify a scenario that distorts the classical technique and briefly explain how it is addressed by the Kittel refinement.
Answer this question and see the worked solution