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

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

3. 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

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

5. 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???

6. 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)

7. Medical Malpractice Claims Severities

8. Claim Severity by Injury Type Over Time

9. Severity Trends – Occurrence Year

10. Severities by Settlement Lag

11. Differences by Age & Sex

15. Impact of Attorney Involvement on Claim Severity

16. Profiles by Resolution Method

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

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

19. Severities By Claim Type

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

21. Impact of Attorney Involvement on Claim Severity

23. Severities by Protection Class

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

26. ALAE / Loss+ALAE by Settlement Lag

27. Non-Economic Damages by Occurrence Year