Actuarial Notes

CAS Exam 7 Spring 2015, Question 2

Study guide: Exam 7

Given the following paid claim information as of December 31, 2014:

Accident Year Paid Claims ($000)
2011 12,000
2012 11,250
2013 14,750
2014 9,500
Total 47,500
  • The expected paid claim emergence pattern has been approximated by the following function where G is the cumulative proportion of ultimate claims paid and x represents the average time since accident occurrence in months.

G(x) = \frac{x}{x + 10}

  • The expected incremental paid claim emergence follows an over-dispersed Poisson distribution with scaling factor \sigma^2 = 25{,}000.
  • Parameter standard deviation for the total estimated unpaid claims is $850,000.

Part a (2 points)

Using a truncation point of 10 years, calculate the coefficient of variation of the total unpaid claims using the LDF method.

Part b (0.5 points)

Identify the direction in which the coefficient of variation of the total unpaid claims estimate would change if the method used to calculate the unpaid claims estimate were changed from the LDF method to the Cape Cod method, and briefly explain the reason it would change in this direction.

Answer this question and see the worked solution

Concepts tested

More questions from this set