2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007...
-
Upload
may-palmer -
Category
Documents
-
view
213 -
download
0
Transcript of 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007...
![Page 1: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/1.jpg)
2008 Casualty Loss Reserve SeminarSession 6 – Personal Automobile Reserving
September 11, 2007San Diego, CA
Presentation by John R. Forney, FCAS
1
![Page 2: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/2.jpg)
Outline
History of No-Fault Auto Insurance
Data Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Methodology
Other Considerations
2
![Page 3: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/3.jpg)
History of No-Fault Auto InsuranceTheory was developed in the mid-1960’s to
provide first party benefits while restricting the right to sue third parties
Sixteen (16) states and Puerto Rico adopted some form of no-fault auto insurance in the early- to mid-1970’s
Five (5) of those states have repealed their no-fault laws, although Pennsylvania passed a new no-fault law in 1990
3
![Page 4: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/4.jpg)
History of No-Fault Auto InsuranceMost states provide for limited first-party medical
benefits
Pennsylvania, New Jersey, and Michigan have provided unlimited first-party medicalPennsylvania until 1984 no-fault repealNew Jersey until 1990 reform (benefits in excess of
$75K ceded to UCJF)Michigan is still unlimited
These are the claims I will be talking about today
4
![Page 5: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/5.jpg)
Long-Term PIP Claims are UniqueTraumatic Injuries
Age of claimants
Nature of expenses
Case reserving
5
![Page 6: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/6.jpg)
Data and Assumptions Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Payments to Date
Baseline average annual payment
Future Inflation
6
![Page 7: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/7.jpg)
Data and Assumptions Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Mortality Table
Claimant Birth Date
Sex of Claimant
Impairment
7
![Page 8: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/8.jpg)
Data and Assumptions Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Reinsurance Parameters
Retention
Limit
Co-Participation
8
![Page 9: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/9.jpg)
Baseline Average Annual Payment
Historical Payments
Amounts
Nature of payments Consistency Less than annual, e.g. prostheses, pain medication
pumps Pharmaceuticals Care – Who is providing? Hospitalizations
9
![Page 10: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/10.jpg)
Baseline Average Annual Payment
Discussions with Claims Department Personnel
What are the causes of historical inconsistencies?
What might change?
Any unusual payments expected?
LAE
Medical bill repricing
IME’s
10
![Page 11: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/11.jpg)
Future InflationVery important and sensitive
Historical Medical Inflation (Medical CPI)
Nature of paymentsCarePharmaceuticalsHospitalizationsUtilization
11
![Page 12: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/12.jpg)
Mortality
Recently Published Table
Age of Claimant
Sex of Claimant
Impairment – Rated Age
12
![Page 13: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/13.jpg)
Reinsurance Parameters
Retention
Limit
Co-Participation
13
![Page 14: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/14.jpg)
MethodologyCalculate annual paid for each future year
using baseline and inflation rate
Calculate ceded part of annual payment
Calculate probability of survival at each age y (Dy/Dx), where x=current age
Discount each annual payment for mortality (payment times Dy/Dx)
14
![Page 15: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/15.jpg)
Other Considerations
Reinsurance
Structured Settlements
15
![Page 16: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/16.jpg)
Reinsurance Considerations
Limit – Inflation can erode limits more quickly than you think
Co-Participation in certain layers
16
![Page 17: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/17.jpg)
Reinsurance Considerations
Collectibility
Direct versus Broker Market
Layers
Reporting Issues
Commutations
17
![Page 18: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/18.jpg)
Structured Settlements
Provide certainty for insurer
Settlement is “discounted”
Need agreement with claimant/attorney and court approval
PA law nullifies them in certain circumstances
18
![Page 19: 2008 Casualty Loss Reserve Seminar Session 6 – Personal Automobile Reserving September 11, 2007 San Diego, CA Presentation by John R. Forney, FCAS 1.](https://reader038.fdocuments.in/reader038/viewer/2022110212/56649f265503460f94c3d447/html5/thumbnails/19.jpg)
Questions and (Maybe) Answers
19