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SP8 September 2020 Q2

T

Tanya Jain

Made first post
"If the losses reported are those that are currently over $1m, then the dataset will be
missing losses that have exceeded the $1m threshold in the past, but now have an
incurred value below the threshold"

Doubt: How can the loss amount reduce? It is generally only inflated to a higher amount in future.


"Development factors assessed from such a dataset will tend to overstate the actual
future development"

Doubt: Truncated data can only understate the losses, not overstate. What am I missing?
 
I think you're confusing 'inflation' with 'development'.
Claims incurred can easily reduce if your estimate of outstanding improves (gets lower) over time, for example if new information comes to light showing that you were overly prudent before.
 
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