CAS Exam 5 Fall 2019, Question 20
Study guide: Exam 5
Given the following:
| Closed Claim Counts — Accident Year | 12 | 24 | 36 | 48 | Ultimate Count |
|---|---|---|---|---|---|
| 2015 | 308 | 555 | 642 | 647 | 647 |
| 2016 | 356 | 563 | 678 | 683 | |
| 2017 | 358 | 575 | 684 | ||
| 2018 | 402 | 795 |
| Cumulative Paid Claims ($000s) — Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2015 | 375 | 745 | 906 | 916 |
| 2016 | 397 | 750 | 922 | |
| 2017 | 422 | 762 | ||
| 2018 | 385 |
- A court decision on December 31, 2018 will increase future claim payments by 20%.
- All claims are closed by age 48.
- There is no severity trend.
(Note from the Syllabus and Examination Committee: The Closed Claim Count triangle was mislabeled in the question, where the first column was labeled "Year" and not "Accident Year" and the final column was labeled "Count" and not "Ultimate Count". This was unintended and was considered during grading.)
Part a (2.25 points)
Use the frequency-severity disposal rate technique to estimate unpaid claims for accident year 2018.
Part b (0.5 points)
Describe an advantage of using the frequency severity technique over a paid development technique in part a. above.
Answer this question and see the worked solution