Claims Applications of GLM Rob Walling CAS GLM Seminar October 4, 2004

Overview What types of claims are most applicable? What factors matter? Why does GLM help?

Basic Formula Case Reserving Model BOP Property Losses – Initial Case Reserve at First Report Water Claims - $2,500 Wind/Hail claims - $5,000 All Others - $1,700 Large Property Losses initially set at $25,000 – Annual Adjustments for Trends

Suitable Claim Types Large Volume of Claims Less Variability in Severities Known Factors Differentiate Severities

Suitable Claim Types - Commercial Non-Severe Property Claims Commercial Auto Physical Damage Commercial Auto Property Damage Commercial Auto PIP General Liability Property Damage OL&T Minor Bodily Injury Workers Compensation Medical Workers Compensation Temporary Total and Minor Permanent Partials Products Liability???

Factors that Impact Severities Geography (State or Regional Courts) Time (Inflation, Settlement Lags) Claimant Characteristics (Age, Class) Insured Characteristics (Vehicle Weight) Attorney Involvement Preferred Claim Network (Medical, Glass, Auto Repair, Attorney) Other Claims Features (Arbitration)

Medical Malpractice Claims Severities

Claim Severity by Injury Type Over Time

Severity Trends – Occurrence Year

Severities by Settlement Lag

Differences by Age & Sex

Impact of Attorney Involvement on Claim Severity

Profiles by Resolution Method

Typical Causes of Loss Property – Fire & Lightning – Windstorm & Hail – Water Damage – Burglary & Theft – Inland Marine Liability – Bodily Injury – Medical Payments – Property Damage

Typical Causes of Loss Workers Compensation – Medical – Temporary Total – Minor Permanent Partial Liability – Bodily Injury – Medical Payments – Property Damage

Severities By Claim Type

Why Use GLM for Formula Case Reserves? Interactions Matter Allows Testing of Trends and Stability Over Time Measures Variability in Severities

Impact of Attorney Involvement on Claim Severity

Severities by Protection Class

Other Claims Applications Benchmarking of Claims Offices Evaluation of External Claim Service Providers Impact of Defense Costs by Claim Type

ALAE / Loss+ALAE by Settlement Lag

Non-Economic Damages by Occurrence Year