Hi, Hope someone can help me with the following context - page 22 : about claims made basis , suggested "some cases it will also cover an extended reporting period, particularly on renewal of coverage" . why ? usually policies written on "claim basis" are liability product , which one claim reported may lead to significant increase in the premium, may one of reason why employer's liability is on Loss occurring basis. so offering extended reporting period is benefiting insurer / 3rd parties ? - page 28: about "redundant outstanding": "If the development pattern is used to project future claims for other years, we should be careful to ensure that the underlying assumptions are still valid. At the very least these link ratios could be excluded from selections, but more actions may be needed to ensure further savings are not projected if the development pattern allows for them to gradually release." , is my understanding correct regarding this paragraph : if same development pattern (which contain redundant O/S) then need to make sure future practices are the same as the past; however, it is then suggested those generate reserves reduction link ratio should be excluded ? why ? if the future practise is remain unchanged. more confusing it the last part: why more action need to ensure further savings are not projected ? if the first sentence suggested dev pattern can be use if future practices are the same as the past? thank you very much
Hi Q1: There may be a number of reasons why an extended reporting period may be used. For example, when switching to a new insurer that doesn't provide a retroactive reporting clause it may be possible that one may end up without cover if there is no extended reporting period from the old insurer. Both extended reporting and retroactive claims reporting are likely going to result in adjustments to the premium where no such clause is included. Q2: The concept here is that claims reviews for redundant outstanding claims may not occur in a regular fashion. The redundant claims would likely have been closed individually gradually over time rather than together in a single claims review. The effect of the claims review on other years may not be the same as the year in which it was done. For the year in which it was done this may lead to a reduction in the claims outstanding leading to lower link ratios compared to the gradual decrease as each claim is reviewed individually over time. But this may not be true for other years in which a claims review was not done. You should not let this irregular event influence your development factors since it may not be the same in other years. If the numbers included in the triangle for some years already don't include the redundant outstanding but your link ratios have been chosen as discussed then you should not release the already released redundant outstanding claims again. You need to do further adjustments for the years without redundant outstanding claims so that you don't get additional savings.
