Actuarial Notes

CAS Exam 5 Spring 2019, Question 14

Study guide: Exam 5

Given the following data for an insurance company evaluated as of December 31, 2018:

Accident Year Average Case Outstanding 12 Average Case Outstanding 24 Average Case Outstanding 36 Average Case Outstanding 48
2015 550 1,100 1,300 1,800
2016 575 1,150 1,500
2017 600 1,300
2018 700
Accident Year Average Reported Claims 12 Average Reported Claims 24 Average Reported Claims 36 Average Reported Claims 48
2015 400 800 1,200 1,500
2016 420 835 1,250
2017 440 875
2018 460
  • Industry average claim cost trend = 4.5%.

Fully evaluate the reasonableness of using the paid claim development technique for this company.

Part a (1.25 points)

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Concepts tested

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