Friedland16.ALAE

Chapter 16: Estimating ALAE (Allocated Claim Adjustment Expenses)

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

BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

• multiplicative method - a ratio method for calculating ultimate ALAE
• additive method - a ratio method for calculating ultimate ALAE
• advantage/disadvantage - of ALAE ratio methods
• ALAE ratio methods - additive versus multiplicative method

reference	part (a)	part (b)	part (c)	part (d)
E (2019.Spring #24)	multiplicative method: - ultimate	ALAE ratio methods: - additive vs multiplicative	advantage/disadvantage: - of ALAE ratio methods
E (2018.Spring #25)	paid ALAE development: - ultimate	additive method: - ultimate	justify final selection: - ultimate
E (2017.Spring #25)	paid ALAE development: - ultimate (with large loss)	multiplicative method: - ultimate (with large loss)
E (2016.Spring #23)	additive or multiplicative: - ultimate	advantage/disadvantage: - of ALAE ratio methods
E (2015.Fall #24)	multiplicative method: - ultimate	additive method: - ultimate	justify final selection: - ultimate
E (2014.Spring #21)	paid ALAE development: - challenges	ALAE ratio methods: - challenges	frequency-severity: - for legal expenses

In Plain English!

Question: describe advantages & disadvantages of using ratio methods to estimate ultimate ALAE