Take the incremental development pattern: 18%, 23%, 20%, 19%, 20%. (We leave aside for the moment the fact that this pattern looks utterly implausible.)
Secondly, let’s apply these numbers to the 2000 UW year: 23% of the total claims will be paid in the next 12 months (ie in 6 months’ time on average). Similarly, 20% of total claims will be paid between the next 25-36 months (ie in 1.5 years’ time on average), etc.
But 18% of total claims have been paid already, so the proportion of unpaid claims to be paid over the next 12 months is 23/(100-18). Similarly, the proportion of unpaid claims to be paid over the following twelve months is 20/(100-18), etc.
You should now have enough information to tackle the remainder of the question. Have a go and see how you get on.
Finally, an extremely similar question came up in April 2013, so I advise you to have a look at it once you have understood what’s going on. You should also look at:
• Subject 303 September 2003 Question 7 part (iii)
• Subject ST3 September 2007 Question 6 part (iv)
Lots of students can’t do these sorts of questions, so you’ll be ahead of the game if you can get the hang of it!
Last edited: Dec 19, 2013
