Friedland04.Meetings

Reading: Friedland, J.F., Estimating Unpaid Claims Using Basic Techniques, Casualty Actuarial Society, Third Version, July 2010. The Appendices are excluded.

Chapter 4: Meeting with Management

Pop Quiz

For what purposes might external benchmarks be particularly useful to an insurer [Hint: TET] Click for Answer 

Study Tips

VIDEO: F-04 (001) Meetings → 4:00 Forum

This is a simple chapter that's mainly common sense. There are a handful of things to memorize but you can cover it very quickly.

Estimated study time: 15 minutes (not including subsequent review time)

BattleTable

• this reading has not been tested on any exam from the year 2012 and subsequent

reference	part (a)	part (b)	part (c)	part (d)
no prior questions

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In Plain English!

This chapter is very boring, but here's what it's about:

To do a reserve analysis properly, you need more than just the data. You have to know what's going on within your company.

When I first started working as an actuary, our written premiums for auto suddenly began rising by 20-30% in many states. We were like, what in the world is going on? We couldn't just start in on the analysis without investigating that. Well, it turned out that many product managers had relaxed the underwriting criteria in their state specifically because they wanted to write more business. (The new bonus program rewarded premium growth.) Obviously that information had to be factored into the analysis. (Spoiler: The losses began rising dramatically about 6 months later.)

So, you have to have some sense for what's going on in the various operational areas of your company:

• claims
• U/W (Underwriting)
• data processing
• accounting
• ratemaking
• reinsurance

The source text lists a million different questions you might ask management in these areas, but you don't have to memorize them. Alice suggests taking 10 minutes to scan the list of questions in the text and pick out 1 question from each category to memorize.

Questions regarding the internal company environment that Alice came up with...

for a claims manager:

• is the claims department settling claims more quickly compared to last year? (or more slowly?)

for an U/W manager:

• have there been changes in mix of business over the last few years? (Ex: geographical changes, changes in deductibles)

for a data processing manager:

• can the data be subdivided into finer categories? (Ex: by policy limit)

for an accounting manager:

• has there been a change in the date when the books are closed for the quarter?

for a ratemaking actuary or product manager:

• have there been any changes to our rating algorithm? (rating changes could impact mix of business)

for someone managing reinsurance arrangements:

• has there been a change in our retention level (claims above the retention level are ceded)

One final point I'd keep in the back of my mind is this:

Areas of consideration regarding the external environment with examples... [Hint: LERS]

Legal

→ court decisions could impact a company's level of liability (environmental cases)

Economic

→ a recession could reduce miles driven which could reduce losses for an auto insurer

Regulatory

→ strengthening of insurance regulation may impact strategic decisions

Social

→ shifting attitudes of the general public towards things like usage-based-insurance, ride-sharing, or self-driving cars

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POP QUIZ ANSWERS

Tail factors

Expected claims (loss) ratios

(used in some reserving methods:

  → Chapter 8: Expected Claims Method

  → Chapter 9: Bornhuetter-Ferguson Method

  → Chapter 10: Cape Cod Method)

Trends (severity & frequency of claims)

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