PERSONAL AUTO RESERVING IN A CHANGING CLAIMS ENVIRONMENT

PERSONAL AUTO RESERVING IN A PERSONAL AUTO RESERVING IN A CHANGING CLAIMS ENVIRONMENTCHANGING CLAIMS ENVIRONMENT

1998 Casualty Loss Reserve Seminar1998 Casualty Loss Reserve SeminarPhiladelphia, PennsylvaniaPhiladelphia, Pennsylvania

Moderator: Scott P. WeinsteinPanelists: Christopher A. Gonwa

Track 2September 28, 1998

PERSONAL AUTO RESERVING IN A PERSONAL AUTO RESERVING IN A CHANGING CLAIMS ENVIRONMENTCHANGING CLAIMS ENVIRONMENT

OverviewOverview Private Passenger Automobile ResultsPrivate Passenger Automobile Results Industrywide Loss DevelopmentIndustrywide Loss Development Environmental FactorsEnvironmental Factors Changing Claim PracticesChanging Claim Practices

– Christopher A. Gonwa, Allstate Insurance CompanyChristopher A. Gonwa, Allstate Insurance Company Actuarial Impact of Claim InitiativesActuarial Impact of Claim Initiatives Q & AQ & A

Private Passenger Automobile ResultsPrivate Passenger Automobile ResultsNet Loss and LAE Ratio - Liability / MedicalNet Loss and LAE Ratio - Liability / Medical

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Net

Los

s R

atio

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

Accident Year

Loss & LAE Loss Only

Private Passenger Automobile ResultsPrivate Passenger Automobile ResultsDirect Loss and ALAE Ratio - Other PP Auto LiabilityDirect Loss and ALAE Ratio - Other PP Auto Liability

60.0%

65.0%

70.0%

75.0%

80.0%

Dire

ct In

curr

ed L

oss

&

ALAE

Rat

io

1992 1993 1994 1995 1996 1997

Calendar Year

Private Passenger Automobile ResultsPrivate Passenger Automobile ResultsDirect Loss and ALAE Ratio - Other PP Auto Liability Direct Loss and ALAE Ratio - Other PP Auto Liability

Top 100 CompaniesTop 100 Companies

All CompaniesAverage

Calendar Year

Dire

ct L

oss &

ALA

E R

atio

0%

20%

40%

60%

80%

100%

120%

140%

1992 1993 1994 1995 1996

Private Passenger Automobile ResultsPrivate Passenger Automobile ResultsDirect Loss and ALAE Ratio - Other PP Auto Liability Direct Loss and ALAE Ratio - Other PP Auto Liability

Top 100 CompaniesTop 100 Companies

0.655 0.688 0.721 0.754 0.787 0.82 0.853 0.886 0.919 0.952 above

19921993

19941995

1996

$840,000

$1,680,000

0%

40%

80%

120%

Direct Loss& ALAE Ratio

Calendar YearDirect Written Prem.

($000's)

Loss & ALAERatio (x100%)

Private Passenger Automobile ResultsPrivate Passenger Automobile Results1 and 2 Year Reserve Development1 and 2 Year Reserve Development

(in $B)(in $B)

($10.0)($9.0)($8.0)($7.0)($6.0)($5.0)($4.0)($3.0)($2.0)($1.0)$0.0

1995 1996 1997

1 Year Rsv Dev2 Year Rsv Dev

Industrywide Loss DevelopmentIndustrywide Loss Development Private Passenger Automobile LiabilityPrivate Passenger Automobile Liability

1.00

1.05

1.10

1.15

1.20

1.25

88 89 90 91 92 93 94 95 96

Accident Year12 - 24 Months 24 - 36 Months

Incurred Age-to-Age Factors

Industrywide Loss DevelopmentIndustrywide Loss Development Private Passenger Automobile LiabilityPrivate Passenger Automobile Liability

0.500.700.901.101.301.501.701.90

88 89 90 91 92 93 94 95 96

Accident Year12 - 24 Months 24 - 36 Months

Paid Age-to-Age Factors

Environmental FactorsEnvironmental FactorsPrivate Passenger Auto LiabilityPrivate Passenger Auto Liability

Reductions in annual inflation ratesReductions in annual inflation rates Increased use of seat beltsIncreased use of seat belts Increased use of airbags, and other safety Increased use of airbags, and other safety

featuresfeatures Decreases in the use of alcohol / DWIDecreases in the use of alcohol / DWI Increases in average car sizeIncreases in average car size Proportional reduction in youthful driversProportional reduction in youthful drivers

Environmental FactorsEnvironmental FactorsPrivate Passenger Auto LiabilityPrivate Passenger Auto Liability

Other Issues:Other Issues:– Familiarity with Managed CareFamiliarity with Managed Care– Claims consciousness Claims consciousness – Aggressiveness of Plaintiff’s BarAggressiveness of Plaintiff’s Bar

Changing Claims PracticesChanging Claims PracticesPrivate Passenger Auto LiabilityPrivate Passenger Auto Liability

Christopher Gonwa - Allstate Insurance CompanyChristopher Gonwa - Allstate Insurance Company

– Senior Manager - Personal Lines FinanceSenior Manager - Personal Lines Finance– Chartered Property and Casualty UnderwriterChartered Property and Casualty Underwriter– Nearing completion of Executive MBA at Nearing completion of Executive MBA at Univ. Univ.

of Illinois - Chicagoof Illinois - Chicago– 11 years of experience in Claims Reserve Division.11 years of experience in Claims Reserve Division.– Personal Lines Finance - Claims Support (March, Personal Lines Finance - Claims Support (March,

1998)1998)

Comprehensive Cost Driver FrameworkComprehensive Cost Driver Framework

Pre-accident drivers attributes and vehicle Pre-accident drivers attributes and vehicle characteristics.characteristics.

External environment.External environment. Compensation system.Compensation system. Post-accident factors.Post-accident factors.

Pre-Accident Cost DriversPre-Accident Cost Drivers

Elements traditionally shown on the policy application:Elements traditionally shown on the policy application: driver attributes - driver attributes - age, sex, marital status, driving record.age, sex, marital status, driving record. vehicle characteristics -vehicle characteristics - make and model, mileage driven, make and model, mileage driven,

multi-car discounts, vehicle use.multi-car discounts, vehicle use. policy age -policy age - new versus renewal policy. new versus renewal policy.

These factors are important for predicting the These factors are important for predicting the occurrenceoccurrence of a of a physical event.physical event.

Traditional FrameworkTraditional Framework

Physical Accident – Driver AttributesDriver Attributes– Vehicle Vehicle

CharacteristicsCharacteristics– Garaging LocationGaraging Location

Pre-Accident Factors

InsuranceCompensation

External EnvironmentExternal Environment

Characteristics which affect claim frequency and claim Characteristics which affect claim frequency and claim severity that are beyond immediate company severity that are beyond immediate company control.control.

physical qualities -physical qualities - traffic density, road hazards and traffic density, road hazards and maintenance, and safety regulations.maintenance, and safety regulations.

economic qualities -economic qualities - prosperity versus recession, prosperity versus recession, rates of inflation.rates of inflation.

human qualities -human qualities - concentration of uninsured concentration of uninsured motorists, demographic shifts.motorists, demographic shifts.

Environmental FactorsEnvironmental FactorsAuto BI Claim Cost InflationAuto BI Claim Cost Inflation

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96

Inflation

Source: Best’s Review

Environmental FactorsEnvironmental FactorsConsumer Price Index - Medical Care InflationConsumer Price Index - Medical Care Inflation

0%1%2%3%4%5%6%7%8%9%

10%

89 90 91 92 93 94 95 96 97 98

Inflation

Source: Bureau of Labor Statistics

Environmental FactorsEnvironmental FactorsSeat Belt Use RatesSeat Belt Use Rates

0%

10%

20%

30%

40%

50%

60%

70%

1985 1995 1997

DriversPassengers

Source: National Highway Traffic Safety Association

35%

40%

45%

50%

55%

60%

65%

80 82 84 86 88 90 92 94 96

All DriversAges 21-30

Environmental FactorsEnvironmental FactorsPercentage of Fatalities with BAC > .10Percentage of Fatalities with BAC > .10

Environmental FactorsEnvironmental FactorsPercentage of Population Under 25Percentage of Population Under 25

0%

10%

20%

30%

40%

50%

70 80 90 96 2000 2050

Year

< 25Years

14 to 24Years

U.S. Census Bureau

Environmental FactorsEnvironmental FactorsFatality Rate per 100 Million VMTFatality Rate per 100 Million VMT

0%

50%

100%

150%

200%

250%

88 89 90 91 92 93 94 95 96 97

Fatality Rate

Source: FARS and GES

Compensation SystemsCompensation Systems

Compensation systems may be grouped into tort Compensation systems may be grouped into tort liability, no-fault, and add-on systems.liability, no-fault, and add-on systems.

The compensation system has a direct effect on The compensation system has a direct effect on claim frequency and claim severity.claim frequency and claim severity.

Important in explaining state-by-state differences Important in explaining state-by-state differences in insurance costs.in insurance costs.

Post-Accident FactorsPost-Accident Factors

Relate to whether an injury claim will be brought for the accident and Relate to whether an injury claim will be brought for the accident and the amount of the claim.the amount of the claim.

type of injury -type of injury - soft-tissue vs. fractures vs. more serious injuries. soft-tissue vs. fractures vs. more serious injuries. attorney representationattorney representation type of medical practitioner - type of medical practitioner - physician vs. chiropractor vs. physician vs. chiropractor vs.

physical therapist. Type of treatment.physical therapist. Type of treatment. claims consciousness claims consciousness company initiatives -company initiatives - medical bill review, early contact of third medical bill review, early contact of third

party claimants, review of soft-tissue claims, quality of claims party claimants, review of soft-tissue claims, quality of claims handling, etc.handling, etc.

Comprehensive FrameworkComprehensive Framework

Physical Accident /Insurance

Compensation

ExternalEnvironment

Post-Accident FactorsPre-Accident Factors

CompensationSystem

Interactions

Interactions

Interactions

Interactions

Changing Claims PracticesChanging Claims PracticesPrivate Passenger Auto LiabilityPrivate Passenger Auto Liability

Internal InitiativesInternal Initiatives– Medical and legal cost containment initiativesMedical and legal cost containment initiatives– Material damage claim handlingMaterial damage claim handling– Claimant contact programsClaimant contact programs– Soft-tissue claims handlingSoft-tissue claims handling– Claim staffing requirementsClaim staffing requirements– Benchmarking:Benchmarking:

» Expert Reserving SystemsExpert Reserving Systems» Adjuster GuidelinesAdjuster Guidelines

Actuarial Impact of Changing Claims PracticesActuarial Impact of Changing Claims PracticesPrivate Passenger Auto LiabilityPrivate Passenger Auto Liability

Sample Methodologies:Sample Methodologies:– Standard Berquist / Sherman analysis.Standard Berquist / Sherman analysis.

» Adjustments made for changes in settlement rate.Adjustments made for changes in settlement rate.» Adjustments made for trend in average outstanding amounts.Adjustments made for trend in average outstanding amounts.» Consideration of basis for interpolation baseConsideration of basis for interpolation base

Closed ClaimsClosed Claims Claims Closed With AmountsClaims Closed With Amounts Claims Closed With Amounts > $Claims Closed With Amounts > $ Actual Claim ClosureActual Claim Closure

» Shift in type of claims being closed adds complexity.Shift in type of claims being closed adds complexity.

AccYear 12 24 36 48 60 72 84 961988 1,118 2,712 4,000 4,864 5,384 5,650 5,812 5,892 1989 1,266 2,974 4,281 5,170 5,669 5,960 6,106 6,170 1990 1,251 2,898 4,217 5,070 5,550 5,812 5,939 6,002 1991 1,241 2,848 4,064 4,855 5,331 5,568 5,691 1992 1,248 2,802 4,030 4,860 5,332 5,559 1993 1,338 3,018 4,329 5,178 5,684 1994 1,569 3,407 4,780 5,773 1995 1,626 3,461 4,800 1996 1,808 3,796 1997 1,820

AccYear 12 24 36 48 60 72 841988 2.427 1.475 1.216 1.107 1.049 1.029 1.014 1989 2.349 1.439 1.208 1.096 1.051 1.024 1.010 1990 2.318 1.455 1.202 1.095 1.047 1.022 1.011 1991 2.295 1.427 1.195 1.098 1.045 1.022 1992 2.245 1.438 1.206 1.097 1.043 1993 2.255 1.435 1.196 1.098 1994 2.171 1.403 1.208 1995 2.129 1.387 1996 2.100

Selected 2.132 1.407 1.203 1.098 1.045 1.023 1.012 1.000 DFU 4.282 2.009 1.428 1.187 1.081 1.035 1.012 1.000

Wewritem Insurance - Private Passenger Automobile Liability (000's)

Development Month

Paid Loss Development

Link Ratios

AccYear 12 24 36 48 60 72 84 961988 0.650 0.865 0.940 0.970 0.980 0.990 0.995 1.0001989 0.650 0.865 0.940 0.970 0.980 0.990 0.995 1.0001990 0.660 0.865 0.940 0.970 0.980 0.990 0.995 1.0001991 0.660 0.865 0.940 0.970 0.980 0.990 0.9951992 0.660 0.865 0.940 0.970 0.980 0.9901993 0.660 0.865 0.940 0.975 0.9851994 0.660 0.870 0.950 0.9751995 0.660 0.870 0.9501996 0.670 0.8801997 0.670

Wewritem Insurance - Private Passenger Automobile Liability (000's)Disposal Rate

Development Month


AccYear 12 24 36 48 60 72 84 961988 1,240 2,957 4,283 5,123 5,517 5,650 5,812 5,892 1989 1,398 3,222 4,572 5,418 5,814 5,960 6,106 6,170 1990 1,317 3,149 4,496 5,309 5,681 5,812 5,939 6,002 1991 1,306 3,079 4,323 5,092 5,449 5,568 5,691 1992 1,311 3,035 4,302 5,095 5,445 5,559 1993 1,406 3,266 4,566 5,178 5,684 1994 1,642 3,569 4,780 5,773 1995 1,699 3,619 4,800 1996 1,808 3,796 1997 1,820

AccYear 12 24 36 48 60 72 841988 2.384 1.449 1.196 1.077 1.024 1.029 1.014 1989 2.305 1.419 1.185 1.073 1.025 1.024 1.010 1990 2.390 1.428 1.181 1.070 1.023 1.022 1.011 1991 2.357 1.404 1.178 1.070 1.022 1.022 1992 2.314 1.417 1.184 1.069 1.021 1993 2.323 1.398 1.134 1.098 1994 2.173 1.339 1.208 1995 2.130 1.326 1996 2.100

Selected 2.133 1.353 1.176 1.079 1.022 1.023 1.012 1.000 DFU 3.872 1.815 1.341 1.141 1.057 1.035 1.012 1.000

Paid Loss Development - Berquist Sherman Adjustment

Development Month

Link Ratios


Acc Paid Paid B/SYear Loss Dev. Ult Dev. Ult1988 5,892 5,892 5,892 1989 6,170 6,170 6,170 1990 6,002 6,002 6,002 1991 5,691 5,757 5,757 1992 5,559 5,752 5,752 1993 5,684 6,144 6,010 1994 5,773 6,850 6,587 1995 4,800 6,853 6,438 1996 3,796 7,627 6,891 1997 1,820 7,794 7,048

Total 51,187 64,840 62,546

Reserve 13,654 11,359



AccYear 12 24 36 48 60 72 84 961988 1,240 2,957 4,283 5,123 5,517 5,650 5,812 5,892 1989 1,398 3,222 4,572 5,418 5,814 5,960 6,106 6,170 1990 1,317 3,149 4,496 5,309 5,681 5,812 5,939 6,002 1991 1,306 3,079 4,323 5,092 5,449 5,568 5,691 1992 1,311 3,035 4,302 5,095 5,445 5,559 1993 1,406 3,266 4,566 5,178 5,684 1994 1,642 3,569 4,780 5,773 1995 1,699 3,619 4,800 1996 1,808 3,796 1997 1,820

AccYear 12 24 36 48 60 72 841988 2.384 1.449 1.196 1.077 1.024 1.029 1.014 1989 2.305 1.419 1.185 1.073 1.025 1.024 1.010 1990 2.390 1.428 1.181 1.070 1.023 1.022 1.011 1991 2.357 1.404 1.178 1.070 1.022 1.022 1992 2.314 1.417 1.184 1.069 1.021 1993 2.323 1.398 1.134 1.098 1994 2.173 1.339 1.208 1995 2.130 1.326 1996 2.100

Selected 2.100 1.326 1.176 1.079 1.022 1.023 1.012 1.000 DFU 3.737 1.779 1.341 1.141 1.057 1.035 1.012 1.000

Wewritem Insurance - Private Passenger Automobile Liability (000's)Paid Loss Development - Berquist Sherman Adjustment TREND RECOGNITION

Development Month

Link Ratios


TrendAcc Paid Paid B/S B/SYear Loss Dev. Ult Dev. Ult Dev. Ult1988 5,892 5,892 5,892 5,892 1989 6,170 6,170 6,170 6,170 1990 6,002 6,002 6,002 6,002 1991 5,691 5,757 5,757 5,757 1992 5,559 5,752 5,752 5,752 1993 5,684 6,144 6,010 6,010 1994 5,773 6,850 6,587 6,587 1995 4,800 6,853 6,438 6,438 1996 3,796 7,627 6,891 6,755 1997 1,820 7,794 7,048 6,801

Total 51,187 64,840 62,546 62,163

Reserve 13,654 11,359 10,976



Loss Development Trend AnalysisLoss Development Trend Analysis– Define metrics that evaluate the Company’s success in Define metrics that evaluate the Company’s success in

achieving various claim initiatives.achieving various claim initiatives.

– Develop regression models to distinguish between Develop regression models to distinguish between positive influences of claims initiatives and other positive influences of claims initiatives and other environmental influences.environmental influences.

– Utilize the regression models to identify conditions Utilize the regression models to identify conditions which would lead to turning-points in loss development.which would lead to turning-points in loss development.

Changing Claims PracticesChanging Claims PracticesStrategic and Operational ModelStrategic and Operational Model

Mission Mission

Key IssuesKey Issues

GoalsGoals

ObjectivesObjectives

ProcessesProcesses

MetricsMetrics

Acc 12 - 24 B/S BI to PD Attorney Contact Medical RestraintYear Dev Factor Change Ratio Rep. Rate Time Inflation Use

1988 2.3841989 2.305 -3.32% -1.17% 0.43% -0.78% 4.33% 4.30%1990 2.390 3.72% 3.86% 0.65% -0.65% 17.13% -2.00%1991 2.357 -1.39% -4.86% 0.71% -0.45% -3.54% 5.99%1992 2.314 -1.81% -3.90% 0.62% -0.48% -15.15% 6.55%1993 2.323 0.35% 1.25% 0.65% -0.33% -19.68% 4.75%1994 2.173 -6.43% -7.72% -0.10% -0.85% -19.81% 3.60%1995 2.130 -1.97% -2.34% -0.20% -0.64% -5.54% 2.06%1996 2.100 -1.41% -0.68% -0.31% -0.34% -22.44% 2.10%1997

Annual Change in:


Loss Development Trend AnalysisLoss Development Trend Analysis

Selection Criteria:Selection Criteria:

Fit StatisticsFit Statistics– R-Squared, Adj. R-Squared, Standard Error, etc.R-Squared, Adj. R-Squared, Standard Error, etc.

Reasonability of coefficientsReasonability of coefficients Multi-collinearityMulti-collinearity Availability of metricsAvailability of metrics


Fitted Change in Development Factor =Fitted Change in Development Factor =Annual Change in:Annual Change in:BI/PD BI/PD xx 0.087970.08797

++ Attorney Rep. RateAttorney Rep. Rate xx 2.684002.68400++ Contact TimeContact Time xx 8.649008.64900++ Med. InflationMed. Inflation xx 0.047770.04777-- Restraint UseRestraint Use xx 0.610620.61062

constantconstant ++ 0.051770.05177

R SquaredR Squared 0.979760.97976


Acc 0.088 2.684 8.649 0.048 -0.611 0.052Year

1989 -0.103% 1.154% -6.746% 0.207% -2.626% 5.177% -2.937%1990 0.340% 1.745% -5.622% 0.818% 1.221% 5.177% 3.679%1991 -0.428% 1.906% -3.892% -0.169% -3.660% 5.177% -1.066%1992 -0.343% 1.664% -4.152% -0.724% -3.998% 5.177% -2.375%1993 0.110% 1.745% -2.854% -0.940% -2.900% 5.177% 0.338%1994 -0.679% -0.268% -7.352% -0.946% -2.198% 5.177% -6.267%1995 -0.206% -0.537% -5.535% -0.265% -1.257% 5.177% -2.623%1996 -0.060% -0.832% -2.941% -1.072% -1.282% 5.177% -1.010%


FittedAcc 12 - 24 B/S Fitted 12 - 24Year Dev Factor Change Change Dev Factor

1988 2.384 2.3841989 2.305 -3.32% -2.94% 2.3141990 2.390 3.72% 3.68% 2.3991991 2.357 -1.39% -1.07% 2.3731992 2.314 -1.81% -2.38% 2.3171993 2.323 0.35% 0.34% 2.3251994 2.173 -6.43% -6.27% 2.1791995 2.130 -1.97% -2.62% 2.1221996 2.100 -1.41% -1.01% 2.1001997


Acc 12 - 24 B/S BI to PD Attorney Contact Medical RestraintYear Dev Factor Change Ratio Rep. Rate Time Inflation Use

1988 2.3841989 2.305 -3.32% -1.17% 0.43% -0.78% 4.33% 4.30%1990 2.390 3.72% 3.86% 0.65% -0.65% 17.13% -2.00%1991 2.357 -1.39% -4.86% 0.71% -0.45% -3.54% 5.99%1992 2.314 -1.81% -3.90% 0.62% -0.48% -15.15% 6.55%1993 2.323 0.35% 1.25% 0.65% -0.33% -19.68% 4.75%1994 2.173 -6.43% -7.72% -0.10% -0.85% -19.81% 3.60%1995 2.130 -1.97% -2.34% -0.20% -0.64% -5.54% 2.06%1996 2.100 -1.41% -0.68% -0.31% -0.34% -22.44% 2.10%

1997 0.08% -0.11% -0.12% 12.47% 1.00%

Annual Change in:


Acc 0.088 2.684 8.649 0.048 -0.611 0.052Year

1989 -0.103% 1.154% -6.746% 0.207% -2.626% 5.177% -2.937%1990 0.340% 1.745% -5.622% 0.818% 1.221% 5.177% 3.679%1991 -0.428% 1.906% -3.892% -0.169% -3.660% 5.177% -1.066%1992 -0.343% 1.664% -4.152% -0.724% -3.998% 5.177% -2.375%1993 0.110% 1.745% -2.854% -0.940% -2.900% 5.177% 0.338%1994 -0.679% -0.268% -7.352% -0.946% -2.198% 5.177% -6.267%1995 -0.206% -0.537% -5.535% -0.265% -1.257% 5.177% -2.623%1996 -0.060% -0.832% -2.941% -1.072% -1.282% 5.177% -1.010%

1997 0.007% -0.295% -1.038% 0.596% -0.611% 5.177% 3.836%


Fitted On-LevelAcc 12 - 24 B/S Fitted 12 - 24 Adjustment 12 - 24Year Dev Factor Change Change Dev Factor Factors Dev Factor

1988 2.384 2.384 0.854 2.1811989 2.305 -3.32% -2.94% 2.314 0.899 2.1731990 2.390 3.72% 3.68% 2.399 0.844 2.1741991 2.357 -1.39% -1.07% 2.373 0.860 2.1671992 2.314 -1.81% -2.38% 2.317 0.897 2.1791993 2.323 0.35% 0.34% 2.325 0.892 2.1791994 2.173 -6.43% -6.27% 2.179 1.002 2.1751995 2.130 -1.97% -2.62% 2.122 1.053 2.1901996 2.100 -1.41% -1.01% 2.100 1.073 2.1811997 3.84% 2.181 1.000

Selected 2.181


AccYear 12 24 36 48 60 72 841988 2.181 1.334 1.196 1.077 1.024 1.029 1.014 1989 2.173 1.331 1.185 1.073 1.025 1.024 1.010 1990 2.174 1.337 1.181 1.070 1.023 1.022 1.011 1991 2.167 1.324 1.178 1.070 1.022 1.022 1992 2.179 1.332 1.184 1.069 1.021 1993 2.179 1.334 1.134 1.098 1994 2.175 1.338 1.208 1995 2.190 1.333 1996 2.181

Selected 2.181 1.334 1.176 1.079 1.022 1.023 1.012 1.000 DFU 3.902 1.789 1.341 1.141 1.057 1.035 1.012 1.000

Link Ratios


Trend RegressionAcc Paid Paid B/S B/S AdjustedYear Loss Dev. Ult Dev. Ult Dev. Ult Dev. Ult1988 5,892 5,892 5,892 5,892 5,892 1989 6,170 6,170 6,170 6,170 6,170 1990 6,002 6,002 6,002 6,002 6,002 1991 5,691 5,757 5,757 5,757 5,757 1992 5,559 5,752 5,752 5,752 5,752 1993 5,684 6,144 6,010 6,010 6,010 1994 5,773 6,850 6,587 6,587 6,587 1995 4,800 6,853 6,438 6,438 6,438 1996 3,796 7,627 6,891 6,755 6,793 1997 1,820 7,794 7,048 6,801 7,102

Total 51,187 64,840 62,546 62,163 62,502

Reserve 13,654 11,359 10,976 11,315



Loss Development Trend Analysis - ObservationsLoss Development Trend Analysis - Observations::

– Aids in distinguishing between the effects of Aids in distinguishing between the effects of environmental factors and company initiatives.environmental factors and company initiatives.

– Helps to quantify the impact of company Helps to quantify the impact of company initiatives.initiatives.

– Identifies conditions which would lead to Identifies conditions which would lead to turning-points in loss development.turning-points in loss development.

Actuarial Impact of Changing Claims PracticesActuarial Impact of Changing Claims PracticesPrivate Passenger Auto Liability - “CPR”Private Passenger Auto Liability - “CPR”

Be CONVERSANTBe CONVERSANT

Be PROACTIVEBe PROACTIVE

Be a RESOURSEBe a RESOURSE

Documents

PERSONAL AUTO RESERVING IN A CHANGING CLAIMS ENVIRONMENT