Practice Question 15.5 (iii) - Inflation Adj ACPC

[David]

Hi,
Reading the solution to this part of the question, it says to "Divide the amount by the number of claims settled in each cell, giving the average amount settled by cell (in £)"

Does this not mean that our average claim triangle would take each cell of the (cumulative) claims payment triangle and divide them by each cell of the (cumulative) number of claims triangle?

So take, for example 2015 (dev 1): This cell in the average claim triangle would be calculated as 120 / 230 = 0.52

However, in the solution this cell 2015 (dev 1) = 604

I am unsure where this number comes from? unless I am completely misinterpreting this... which i probably am

Would appreciate your help on this please - thank you!

CONTEXT: I am basing my method on the example seen on page 646 in the SP7 CMP Notes

 

[Katherine Young]

This is an inflation-adjusted ACPC method, so use the real triangles as calculated in part (ii).

 

[David]

I'm not quite sure which part you are referring to in your response. In the solution to part (ii) the cumulative data that has been inflated to 2018 has 2015(1) = 139. If we divide this claim amount by the claim number in the corresponding cell we get 139/230 = 0.6...

But the solution for part (iii) says that when we divide the amount by the number of claims settles we get an average amount 604. I am unsure how to get to these figures.


In addition to the above: What is the difference between the solution given to the example in Pg 646 the notes for the ACPC method and this method..

This method in part (iii) seems to take an average of each column in the average claim triangle and use this later on in the solution. However on for the Pg 646 example, we first calculate the average triangle then project to ultimate and then project the claim numbers to ultimate and use those two sets of ultimate to calculate ultimate claim amounts.

 

[Katherine Young]

we get 139/230 = 0.6...

That's right David. Your answer is in £000s, we're working in units.

What is the difference between the solution given to the example in Pg 646 the notes for the ACPC method and this method..

There are many variants of the ACPC method. Any reasonable method would score marks in the exam.

 

[nadiah]

Hi, with regards to David's question. I am struggling with this part as well.

for example the inflated cumulative paid amount at 2015, dev 2 ~ 232,000. to get the ACPC, it would take 232,000/360=644. but the solution is 712.

can anyone enlighten me on how to arrive at 712?

Thanks a lot.

 

[Darren Michaels]

You need to divide the incremental claims paid in the period (in 2018 terms) by the number of claims settled in the period,
ie - [84,000*(1.05)^2]/130 = 712.