Hello, Part i) Notification delays: My initial thoughts were that such delay would be high due to: 1. Claims only reported after reaching census points 2. Insured may wait for condition to stabilise 3. Reported to reinsurer only once per quarter as stated in question However, the solution says notif delay would be low as event are sudden, and notified quickly. What am I missing here? Would I get marks for stating my original points mentioned above? If there is an existing thread on this question, please redirect me. Cheers, Jammy
To add to my earlier post, I would expect the below points to be important characteristics of the ri recoveries: 1. Nil claims Eg: Court award in favour of insurer 2. Trends in frequency due to increased litigiousness of society, claim farming activities, allowing no win no fee arrangements etc 3. Some seasonality as accidents more likely in bad weather, or some seasons exposure would be lower Eg: Rainy season roads are more slippery None of these 3 points appear in the solution, which surprised me. Any clue if these would have picked up marks?
These are liability claims attaching at high levels, so we're talking life-threatening events here. These sorts of claims are notified quickly to insurers and reinsurers, you don't hang about to see if it stabilises first, you get it reported quickly so that you can start things rolling - settlement delays will be long, though. Three months reporting delay still counts as short in the great scheme of things. Nil claims are unlikely to occur - not many events will be disallowed. Trends - yes, that would be a fair point about litigiousness. Seasonality - yes, a fair point too. Whether these last two would get you a point may vary from question to question, though, depending on the number of marks. With claims characteristics questions, there are loads of things potentially to say, you have to be a bit choosy to make sure you score for the main points, particularly if there's only 5 marks as in this case.
Thanks for your response. Could I get a fair gauge of what is a large claim for motor BI in GBP terms? Should I infer anything above 150,000 GBP is large and less frequent (than the smaller ones) ? My experience is in another market and a straight currency conversion may not be a reasonable thing to do.
It's not that binary I'm afraid, and what counts as 'large' will obviously be different to every company. A small company might balk at 150k GBP but to a large company writing large volumes, that's not a lot (unless of course you get loads of them - don't forget frequency too). For BI, there's a broad idea that >1m GBP is large (these claims can settle as PPOs). The largest claim in the UK historically has been around 60m GBP, and the largest in Europe has been around 250m GBP. But 40 years ago or so, even 1m was considered huge. Claims for motor are positively skewed - anything larger will be less frequent! So try to avoid putting a figure on it. The examiners will want you to understand the general distribution more than anything. Also bear in mind that PD claims rarely go above 100k (and even that's a pretty nice car).
Thanks Ian, this gives me the required broad gauge of settlement values I need to answer exam questions
