Difference between revisions of "Friedland08.ExpectedClms"
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===Example A: Very Easy=== | ===Example A: Very Easy=== | ||
| − | Recall that LR normally stands for Loss Ratio, and that this is the same things as CR or Claims Ratio. Let '''ECR''' stand for Expected Claims Ratio | + | Recall that LR normally stands for Loss Ratio, and that this is the same things as CR or Claims Ratio. Let '''ECR''' stand for <u>ultimate</u> Expected Claims Ratio |
ECR is a projection, or an ''expectation'' of what the loss ratio or claims ratio is going to be in a future period. Let's start with a very simple example of the ECR method. Suppose you're given: | ECR is a projection, or an ''expectation'' of what the loss ratio or claims ratio is going to be in a future period. Let's start with a very simple example of the ECR method. Suppose you're given: | ||
| − | : '''ECR''' = 75% ''(based on historical CRs from the past | + | : '''ECR''' = 75% ''(based on historical CRs from the past few years being all between 70% and 80%)'' |
: '''EP''' = 1,000 | : '''EP''' = 1,000 | ||
| Line 71: | Line 71: | ||
To say this in words, if you think the ultimate claims ratio for a particular year is going to be 75%, and you also know the EP is 1,000, then the ultimate claims ''(in dollars)'' is obviously just the product of ECR and EP. | To say this in words, if you think the ultimate claims ratio for a particular year is going to be 75%, and you also know the EP is 1,000, then the ultimate claims ''(in dollars)'' is obviously just the product of ECR and EP. | ||
| + | |||
| + | ===Example B: Estimating ECR=== | ||
| + | |||
| + | In the previous example the actuary came up with an estimate of 75% for the ECR just by looking at past years and taking an educated guess. But estimating the ECR is the '''key''' to this method so let's see if we can be a little more sophisticated. Suppose you're given: | ||
| + | |||
| + | :{| class='wikitable' style='text-align: center;' | ||
| + | |- | ||
| + | !! AY !! OLEP !! ultimate claims | ||
| + | |- | ||
| + | || 2017 !! 1,000 !! 750 | ||
| + | |- | ||
| + | || 2018 !! 1,000 !! 750 | ||
| + | |- | ||
| + | || 2019 !! 1,000 !! 750 | ||
| + | |- | ||
| + | || 2020 !! 1,000 !! 750 | ||
| + | |- | ||
| + | || 2021 !! 1,000 !! ? | ||
| + | |} | ||
==POP QUIZ ANSWERS== | ==POP QUIZ ANSWERS== | ||
Revision as of 20:36, 24 April 2020
Contents
Pop Quiz
Study Tips
BattleTable
Based on past exams, the main things you need to know (in rough order of importance) are:
- fact A...
- fact B...
reference part (a) part (b) part (c) part (d) E (2016.Spring #16) unpaid claims:
- expected claims methodFriedland07.Development Friedland09.BornFerg E (2015.Fall #17) Friedland07.Development ultimate claims:
- expected claims methodE (2015.Spring #18) E (2014.Fall #15) E (2014.Spring #19)
In Plain English!
Example A: Very Easy
Recall that LR normally stands for Loss Ratio, and that this is the same things as CR or Claims Ratio. Let ECR stand for ultimate Expected Claims Ratio
ECR is a projection, or an expectation of what the loss ratio or claims ratio is going to be in a future period. Let's start with a very simple example of the ECR method. Suppose you're given:
- ECR = 75% (based on historical CRs from the past few years being all between 70% and 80%)
- EP = 1,000
Then by the ECR method:
- ultimate claims = ECR x EP = 75% x 1,000 = 750
To say this in words, if you think the ultimate claims ratio for a particular year is going to be 75%, and you also know the EP is 1,000, then the ultimate claims (in dollars) is obviously just the product of ECR and EP.
Example B: Estimating ECR
In the previous example the actuary came up with an estimate of 75% for the ECR just by looking at past years and taking an educated guess. But estimating the ECR is the key to this method so let's see if we can be a little more sophisticated. Suppose you're given:
! AY OLEP ultimate claims 2017 !! 1,000 !! 750 2018 !! 1,000 !! 750 2019 !! 1,000 !! 750 2020 !! 1,000 !! 750 2021 !! 1,000 !! ?
