Solution 15.4

[zuglubuglu]

The last reason listed is "weaker initial and/or claims underwriting". Is there a typo here and if not, can someone clarify further?

Would these be other possible reasons?

• Soft market leads to lower premiums per policy. Therefore if the unit of exposure is earned premiums; the claim freq per unit of exposure would be expected to increase. However the claim frequency : policies written may have not experienced this.
• Country is in recession which may lead to more liability claims.
• Change in the mix of business.
• Change in the treatment of nil claims (not previously recorded but now they are).
• Excess for claiming not adjusted. Claims in the past that were below the excess to be opened as claims in the past may have now increased in value due to inflation.

 

[Darren Michaels]

Hi there

Yes the solution to Question 15.4 is not intended to be exhaustive. It only includes some of the possible reasons. In reality there are many more possible reasons.

In general your additional suggestions are fine except:
1. exposure is more normally number of employees for EL
2. I am not certain that a recession will necessarily lead to more liability claims. It is likely to lead to more fraudulent and theft claims.
3. Any changes to the excess will be covered by the first point in the solution (changes to policy terms and conditions).