View
213
Download
0
Category
Preview:
Citation preview
2008 Casualty Loss Reserve SeminarSession 6 – Personal Automobile Reserving
September 11, 2007San Diego, CA
Presentation by John R. Forney, FCAS
1
Outline
History of No-Fault Auto Insurance
Data Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Methodology
Other Considerations
2
History of No-Fault Auto InsuranceTheory was developed in the mid-1960’s to
provide first party benefits while restricting the right to sue third parties
Sixteen (16) states and Puerto Rico adopted some form of no-fault auto insurance in the early- to mid-1970’s
Five (5) of those states have repealed their no-fault laws, although Pennsylvania passed a new no-fault law in 1990
3
History of No-Fault Auto InsuranceMost states provide for limited first-party medical
benefits
Pennsylvania, New Jersey, and Michigan have provided unlimited first-party medicalPennsylvania until 1984 no-fault repealNew Jersey until 1990 reform (benefits in excess of
$75K ceded to UCJF)Michigan is still unlimited
These are the claims I will be talking about today
4
Long-Term PIP Claims are UniqueTraumatic Injuries
Age of claimants
Nature of expenses
Case reserving
5
Data and Assumptions Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Payments to Date
Baseline average annual payment
Future Inflation
6
Data and Assumptions Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Mortality Table
Claimant Birth Date
Sex of Claimant
Impairment
7
Data and Assumptions Needed to Project Unlimited Long-Term No-Fault (PIP) Reserves
Reinsurance Parameters
Retention
Limit
Co-Participation
8
Baseline Average Annual Payment
Historical Payments
Amounts
Nature of payments Consistency Less than annual, e.g. prostheses, pain medication
pumps Pharmaceuticals Care – Who is providing? Hospitalizations
9
Baseline Average Annual Payment
Discussions with Claims Department Personnel
What are the causes of historical inconsistencies?
What might change?
Any unusual payments expected?
LAE
Medical bill repricing
IME’s
10
Future InflationVery important and sensitive
Historical Medical Inflation (Medical CPI)
Nature of paymentsCarePharmaceuticalsHospitalizationsUtilization
11
Mortality
Recently Published Table
Age of Claimant
Sex of Claimant
Impairment – Rated Age
12
Reinsurance Parameters
Retention
Limit
Co-Participation
13
MethodologyCalculate annual paid for each future year
using baseline and inflation rate
Calculate ceded part of annual payment
Calculate probability of survival at each age y (Dy/Dx), where x=current age
Discount each annual payment for mortality (payment times Dy/Dx)
14
Other Considerations
Reinsurance
Structured Settlements
15
Reinsurance Considerations
Limit – Inflation can erode limits more quickly than you think
Co-Participation in certain layers
16
Reinsurance Considerations
Collectibility
Direct versus Broker Market
Layers
Reporting Issues
Commutations
17
Structured Settlements
Provide certainty for insurer
Settlement is “discounted”
Need agreement with claimant/attorney and court approval
PA law nullifies them in certain circumstances
18
Questions and (Maybe) Answers
19
Recommended