Hello, In the CMP SP7-14, page 3, the Question ask: "Based on your knowledge of different reserving methodologies from your earlier studies, write down the common approaches to reserving for reported claims. " And the answer state that: -Basic and inflation adjusted Chain Ladder for reported claim May I know how they do that? I thought that reported claims are estimated through case estimate only? My understanding is: reported claims are the claims which the insurer already knows about the severity of the claim and the claim adjudicator already know the estimated severity. And only case estimate is enough in this case. Where am I wrong here?
I think you'll need to re-study parts of CM2 (previously CT6) before tackling this part of SP7, if you're getting stuck at this point. Reported claims still change over time. The chain ladder methods will project the ultimate settled claims amounts, including new claims and revisions to existing claims. You also need to consider different origin cohorts, which are explained in SP7 too.
Let me clarify what is your definition of reported claim? If your definition is: Reported claim = Paid claim + Case reserve Then the reserve for Unreported claims can be derived from the Reported claim through a Triangle (ie Chain Ladder or BF). The reserve for Reported but Not Settle is the Case Reserve. That's match the answer perfectly. But if you only say, reserve for Reported claims, the only thing I can think of is Case estimate. I don't study CM2 because I am from the SOA side, but I believe I have learned enough about the Run-off triangles. The triangle of Paid and case reserve will include the changes over time you mentioned.
CM2 is presumed knowledge for SP7, and given your questions I do think studying that material first will help you with SP7. I think you're confusing the concepts of 'claim' and 'reserve', 'reported' and 'incurred'. All are covered there. Also make sure you're familiar with the terms IBNR, IBNER, and case estimate. You may need to do some googling too. Strongly recommend a tutorial to firm up your understanding once you've looked at that. If you're based overseas, we have online tutorials (both live and pre-recorded) that can help - more details on our website. Good luck!
