Hi all Could anyone please tell me do Run-off triangles are also used in Life Insurance ? If yes, then how? and if No, then why? Any help would be appreciated. Thank you
I don't have practical experience. I would try to apply my studies from reading course notes. for Run-off triangles of any type. Out of many types of reserves: Incurred But Not Yet Reported(IBNYR or pure IBNR) and, Incurred But Not Enough Reported(IBNER) are the main outcome from the triangles where main difference arise(Note: we cannot estimate pure IBNR from Reporting Year origin year ). taking Accident Year(or can say death year) for the following writing: how Life is different from NonLife Insurance: if we think in terms of loss distribution(no need to go into detailed characteristics to compare them) - most of the NonLife Insurance products are uncertain on frequency and severity. But, for Life products - they are not uncertain on severity figure, only frequency of loss is uncertain. even under NonLife Insurance - run-off triangle is not always applicable for all classes, due to many different types of NonLife products with the differences in their loss characteristics. So, my conclusion: Run-off triangle technique can be used to calculate IBNYR for life products but not IBNER. that is, development in frequency can be estimated but not severity. Even for the aggregate triangle - no need to solve when we can multiply with an estimate of unreported incurred frequency. Even for regular payment benefit -uncertainty is for how much time insurer will pay rather than how much. For Bonus cover - the amount would be applicable on the incurred date, still no uncertainty on average payment per accident year. (different triangle needed for each homogeneous group) PS: may also estimate from Life Tables(probably adjusted for any particular product).
