Could someone please confirm whether I have understood the below paragraph from the core reading properly (chapter 15 - triangulation methods)?
Sometimes we use the ultimate claims derived from an aggregate method (for example, chain ladder) to estimate the average claim amount for the ACPC method by dividing the ultimate by the estimated number of claims for the origin period. The averages for more developed origin years are then trended and used for more recent origin periods.
Does this mean we'll calculate the ultimate claims per origin period (AY, UWY, RY, etc.) using one of the chain ladder methods, then divide that ultimate by the total number of reported claims from that origin period and use that figure (adjusted for inflationary differences) for all development periods corresponding to that origin year?
For example, for accident year 2017 we have recorded 150 claims in total. Our aggregate ultimate claim amount by the chain-ladder is £15,000. Therefore, our average cost per claim over all claims relating to the 2017 accident year is £100. Our analysis shows a trend of 7% between 2017 and 2018 so we apply this trend to get an average cost per claim of £107 for the 2018 accident year.
I can't understand what the point of this would be. Is it in the scenario where our most recent origin periods have very volatile data and hence don't give reasonable estimates under the standard ACPC method?
Sometimes we use the ultimate claims derived from an aggregate method (for example, chain ladder) to estimate the average claim amount for the ACPC method by dividing the ultimate by the estimated number of claims for the origin period. The averages for more developed origin years are then trended and used for more recent origin periods.
Does this mean we'll calculate the ultimate claims per origin period (AY, UWY, RY, etc.) using one of the chain ladder methods, then divide that ultimate by the total number of reported claims from that origin period and use that figure (adjusted for inflationary differences) for all development periods corresponding to that origin year?
For example, for accident year 2017 we have recorded 150 claims in total. Our aggregate ultimate claim amount by the chain-ladder is £15,000. Therefore, our average cost per claim over all claims relating to the 2017 accident year is £100. Our analysis shows a trend of 7% between 2017 and 2018 so we apply this trend to get an average cost per claim of £107 for the 2018 accident year.
I can't understand what the point of this would be. Is it in the scenario where our most recent origin periods have very volatile data and hence don't give reasonable estimates under the standard ACPC method?