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

Study Tips

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)

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

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 at National General in NC, 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 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 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 about 5 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 categories like policy limit?

for an accounting manager:

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

for a ratemaking actuary or product manager:

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

for someone managing reinsurance arrangements:

• has there been a change 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... [Hint: LERS]

Legal

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

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