1 / 11

CAS Loss Reserve Seminar

CAS Loss Reserve Seminar. Unique Reserving Issues For Private Passenger Automobiles September 24, 2002 Greg Hayward - FCAS, FCIA, MAAA, CPCU State Farm Mutual Automobile Insurance Company. Be Careful. Ohio New York

Download Presentation

CAS Loss Reserve Seminar

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. CAS Loss Reserve Seminar Unique Reserving Issues For Private Passenger Automobiles September 24, 2002 Greg Hayward - FCAS, FCIA, MAAA, CPCU State Farm Mutual Automobile Insurance Company

  2. Be Careful Ohio New York New Jersey

  3. Traditional Methods How Far Off Can You Be ? 1997 Ohio Uninsured/Underinsured 3 Year Paid Link Ratios 29.4% High 5 Year Paid Link Ratios 29.4% High 3 Year Incurred Link Ratios 11.9% High 5 Year Incurred Link Ratios 15.9% High Bornhuetter-Ferguson 18.4% High

  4. Why Didn’t Traditional MethodsWork ? Ohio UM/UIM 1993 Supreme Court Ruling in the Savoie case: • UM and UIM Coverage Stacks • UIM Excess vs. difference in limits • Each Person entitled to separate limits 1994 Martin Case – Owned but uninsured exclusion was invalidated Oct. 1994 – Legislature changed UM/UIM back to pre-Savoie case

  5. Traditional MethodsHow Far Off Can You Be? 1999 Ohio Uninsured/Underinsured 3 Year Paid Link Ratios 28.1% Low 5 Year Paid Link Ratios 28.5% Low 3 Year Incurred Link Ratios 12.3% Low 5 Year Incurred Link Ratios 16.1% Low Bornhuetter-Ferguson 3.2% High

  6. Why Didn’t Traditional Methods Work ? 1999 Ohio UM/UIM • Linko Case – Invalidated every UM rejection form • Scott-Prontzer Case – Employees and family members under employer’s UM coverage even when outside scope of employment in non-company vehicles • Supreme Court overturned the legislature’s tort reform law

  7. Traditional MethodsHow Far Off Can You Be ? New York AIP – PIP 3 Year Link Ratios 26.0% Low 5 Year Link Ratios 25.0% Low Bornhuetter-Ferguson 52.9% Low

  8. Why Didn’t Traditional Methods Work? New York • Rapidly Changing Mix of Business -> 94-97 : 45% decline in policies with 56% increase in cost per car • FR Law Change in 1996 from 10/20/5 to 25/50/10 • Presbyterian case limiting the time to review claims without penalties • Suspected Fraud Claims Tripled

  9. Traditional MethodsHow Far Off Can You Be ? New Jersey PIP 3 Year Paid Link Ratios 35.2% Low 5 Year Paid Link Ratios 32.8% Low 3 Year Incurred Link Ratios 15.0% Low 5 Year Incurred Link Ratios 22.7% Low Bornhuetter-Ferguson 13.7% Low

  10. Why Didn’t Traditional Methods Work ? New Jersey 1990 • Half of the market was in residual market (FIUA) • MTF forced depopulation (10/90-10/92 – Lost about $2 Billion in 2 years) – AIP startup on 10/92 • Take All Comers Law, Onerous Rate Regulation, Fraud, Abuse • Rapid growth with a deteriorating mix of business • Excess Profits Law requires paid loss development 1997 • Establish Urban Enterprise Zone Assignments • Further Restricted Ability to Underwrite and Manage Business 1999 • Mandated 15% overall Rate Rollback, 27% on PIP • Reforms promised but not put into place

  11. What Should I Do? • Don’t be just mechanical – Examine each consideration in the Loss Reserve Principles and ASOP #36 • Do exploratory data analysis of multiple diagnostics to detect changes in historical patterns • Use a multi-step process to gather input from Operational Areas (Accounting, Claims, Underwriting, Legal) • Compare to the rest of the Industry • Consult with external Actuaries • Do more frequent analyses using various methods

More Related