In most cases, the current reserving practice consists of using methods based on claim development triangles for point estimate projections and capital requirement calculations. Taking advantage of the information embedded in individual claims data is a promising alternative to address the need for more accurate models within the reserving practice. This white paper by Milliman’s Laurent Devineau, Fabrice Taillieu, and Alexandre Boumezoued examines the innovative opportunities offered by alternative individual reserving models and the main challenges with their implementation.
Note: On Monday, October 15, the Milliman Chicago casualty practice facilitated an actuarial roundtable discussion for the Chicago chapter of the Risk and Insurance Management Society (RIMS) covering four topics that have received a good bit of attention recently. Participants represented local businesses from healthcare service providers to nonprofits to international fast food corporations. Attendees were encouraged to share their experiences on each of the topics. This is the fourth, and final, article in our four-part series discussing each topic.
During our roundtable discussion we stressed how important it is to discuss changes in the program with your actuary and the impacts this would have. While discussing the various impacts that the most prominent changes can have on a program the focus inevitably widened to related topics.
Safety programs/Back to work
Some of the most prominent examples were the discussions on safety programs and the impact that they can have on an actuarial study, which in turn led to several discussions on back-to-work programs. The RIMS members had great insights to share on the structuring of a back-to-work program with their colleagues. Among them were making sure that everyone is involved and signs off on the program because sometimes it seems that you are “creating” jobs just to get people back into the workforce and also to set time limits on these “created” jobs to ensure that they do not become permanent.
The other topic that garnered the most attention in this area was the claims reserving and philosophy. We discussed several of the impacts changing the reserving philosophy has, including the “double whammy” effect. Whereas most of the time reserving changes occur when companies change carriers or third-party administrators (TPAs), several of the clients asked us about the impact of the risk manager strengthening the reserves on individual claims and not necessarily changing the entire process of reserving. One of the participants was able to share a personal experience relating how she worked through it with her actuaries. She said that the incurred but not reported (IBNR) reserving levels did not increase, which was due to the effective communication. That is exactly what the roundtable hoped to emphasize with this topic.