Friedland07.Development

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

Chapter 7: Development Technique(or Chain Ladder Technique)

Study Tips

This is a long chapter but the development method, also called the chain-ladder method, is not hard. Once you practice it a few times, you'll get the hang of it. It's likely already familiar to you many of you anyway. The almost 60 pages of the source text are organized like this:

first 15 pages: (page 84-98) mechanics of the development method

• source text explains the method in words but it's simpler just to look at a few examples

next 8 pages: (page 98-105) influences of a changing environment

• this is very important – you learn how changes in the environment affect the accuracy of the method
• I have used SimPolicy which my own policy & claims simulation software to create illustrative examples

last 25 pages: (page 106-130) PDFs of Excel spreadsheet to illustrate the material

• you can look at these but I have provided simplified examples with video explanations and further practice problems that you might want to look at before the text examples

Note: If you're reading this chapter as part of your first pass through the pricing material, you only need to know the first 15 pages on the mechanics of the method. If you're studying the reserving material, then you should study the whole chapter.

Estimated study time: 2-5 days depending on whether you're covering this material for pricing or reserving (not including subsequent review)

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 (2019.Spring #16)	ultimate: - rptd devlpt	industry data: - considerations	impact: - of operational change
E (2019.Spring #19)	ultimate: - rptd devlpt (tort reform)	Friedland09.BornFerg
E (2018.Spring #20)
E (2017.Fall #17)
E (2017.Fall #19)	ultimate: - rptd devlpt	diagnostic: - operational changes	accuracy issues: - unpaid claim data
E (2017.Spring #20)
E (2016.Fall #25)
E (2016.Spring #14)
E (2016.Spring #16)	Friedland08.ExpectedClms	ultimate: - paid devlpt	Friedland09.BornFerg
E (2015.Fall #22)
E (2015.Spring #23)
E (2014.Spring #13)
E (2013.Spring #16)

In Plain English!

Let's start by looking at a simple example. We know from chapter 5