Exam 5 Practice Question 6
Study guide: Exam 5
An actuary is estimating unpaid claims as of December 31, 2025 for a private passenger automobile bodily injury liability book. Over the past two years, court decisions in the jurisdiction have expanded the coverage the policies are interpreted to provide, and the statute of limitations for filing bodily injury claims has been lengthened. Claims management reports no change in case reserving practice or in the speed of settlement.
Which approach for the most recent accident year is most appropriate?
- A) Give weight to the expected claims technique, with an expected claim ratio reflecting the new legal environment
- B) Rely on the reported development technique, since case reserving practice and settlement speed are unchanged
- C) Rely on the paid development technique, since court decisions do not affect payments until claims settle
- D) Adjust case outstanding for a change in adequacy, then rely on the reported development technique
- E) Rely on the development technique unadjusted, since the trend in the historical data already reflects legal change
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