Diagnostics

[code9063]

Hi,

I'm not sure what the definitions are for different terms.

For example, Case estimate / incurred claims ratio: Are we simply comparing two estimates that are separately estimated? i.e. they are like for like in terms of what's been included in each term? But we don't necessarily use case estimate for every claim, especially for attritional claims?
I think my confusion comes from what case estimate is. According to Glossary, it is individually estimated outstanding claims reserve.

IBNR / Case estimate: Would case estimate include IBNR and therefore the ratio is always less than 1? What does this ratio tell us?

For survival ratio, either IBNR or reserve can be used in the numerator. I don't see how using IBNR instead of reserve would also tell us about how long the reserve would last.

 

[Hemant Rupani]

Hi,

Case estimate is pertaining to individual estimation of reported outstanding claims only.
case estimate is made for attritional claims as well, once they are reported and are outstanding. However, there might be fixed rules to set case estimate for smaller claims, say, if claims for windscreen damage is reported set some predetermined amount as case estimate, without detailed loss assessment.
IBNER is for expected increase(or decrease in reported outstanding held... (can be estimated from statistical analyses)

So,
\(\frac{Case~estimate}{Incurred~claims}=\frac{Case~estimate}{Paid~claims~+~Case~estimate} \) ... where Incurred claims do not includes IBNR.
case estimate is made for attritional claims as well, once they are reported and are outstanding.

\(\frac{IBNR}{Case~estimate} \) it's already explained in the book that this diagnostic is more useful for IBNER in the Numerator part, so to understand the uncertainty around case estimate.

survival ratio is actually based on the assumption that current paid( or incurred) development continues at given rate... could be used test reserve adequacy for very long-tailed classes, where estimation of ultimate can be very uncertain. say, n-year survival ratio can represent "if claims paid continues at the same rate, current reserves are adequate to survive for n years"