Hi,
I am having issue of understanding the answer for Q7.1(iii) part (a) about different ways of defining large individual claims, can someone please help me ?
Method 2: "extract the whole of each large claim and associate history if its incurred claim amount exceeds a certain threshold..."
kiki
I am having issue of understanding the answer for Q7.1(iii) part (a) about different ways of defining large individual claims, can someone please help me ?
Method 2: "extract the whole of each large claim and associate history if its incurred claim amount exceeds a certain threshold..."
- so am i right to say it is looking at the current incurred amount and flag the claim as large if incurred is greater than large loss threshold ?
- in the point of " difficult to reconcile with last year's data" : is that because non-large triangle will need to be restated after filtered the large claim, therefore the triangle of non-large from previous years are difficult to reconcile with current year ?
- This method is different to method 2 as it is looking at the historical incurred instead of current view of incurred ?
- if it is right , then how do you allow the inflation effect? as claim incurred as 500k 10 years ago may classified as large , but now the large threshold may need to increase to 1 million?
- is that why the last point "distort any large claim average cost analysis ? as number of claims can be classified as large will increase year over year due to inflation
- I am not quite understand the last point about "development factors that rely too heavily on such an instance would result in an optimistic non-large IBNR estimate ? so is that mean using such method may lead to under-estimate the IBNR for non large claim? how so?
kiki