Assignment X3 Q3.5

[B_actuary]

Hi,

For this question, how do you work out the grossing up factor?

 

[jensen]

Hi B

I assume you mean the proportions of outstanding claims for each accident month? Here is what I think I would have done it:

The proportions can be calculated using the delay table. You start with 1000 accident, but only 250 is reported (ie factor 0.25). In the second month, a further 375 is reported of the original 1000 accidents (ie factor 0.375) and so on.

Notice how all the 1000 accidents have been fully reported by the end of 8 months. So if you work backwards using the number of reported claims, the 190 claims reported in December should represent only 25% of the total accidents in Dec, therefore you should gross this up by 190/0.25 = 760. For November, because two months have passed (otherwise, the data should stop at November), you should use the second month factor, ie 0.375 and so on until April (accidents from Jan to April should have been fully reported by December)

Make sense?

 

[B_actuary]

Thank you Jenson, that makes sense.