T re nds in Me dic a l Profe ssiona l L ia bility T he Re c e nt - - PowerPoint PPT Presentation

T re nds in Me dic a l Profe ssiona l L ia bility T he Re c e nt a nd More Dista nt Pa st

Je ffe r y J. Smith, F CAS, MAAA, CPCU, ARe Vic e Pr e side nt and Chie f Ac tuar y, NORCAL Gr

• up

"The past, like the future, is indefinite and exists only as a spectrum of possibilities“

• Stephen Hawking

Re vie w of 4 PIAA Me dic al Pr

• fe ssional L

iability Car r ie r s

Combine d Re sults of: NORCAL , PMSL IC, COPIC, ISMIE

• 1. Co mpa nie s ha ve b ro a d ra ng e o f insure ds
• 2. Undisto rte d b y c ha ng e s b y la rg e shifts in

g e o g ra phic a l distrib utio ns a nd pro duc t o ffe ring s

• 3. No rma lize d b y c o mpa ny - re la tive re pre se nta tio n

fixe d thro ug h time

• 4. Co mb ine d re sults/ No n-sta te spe c ific , tho ug h

c o mb ina tio n a nd we ig hting mig ht va ry b y va ria b le

• 5. L
• sse s a nd c o unt Pro je c te d to “Be st E

stima te ”; no t just re fe re nc ing Sc he dule P ultima te s

2

T

• pic s Disc usse d:

►Re se rve Re le a se s - T

he re c e nt pa st 15 ye a rs

►F

re q ue nc y a nd c lo sing type pa tte rns - T he pa st 35 ye a rs

►Re la tio nships b e twe e n re po rte d fre q ue nc y a nd c la im

type s

►I

nde mnity a nd AL AE se ve rity tre nds - the pa st 15 ye a rs

3

Annual Ne t Re se r ve ($) Re le ase

4

(50,000) 50,000 100,000 150,000 200,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1999 to 2001: Ave ra g e re le a se $80M 2002 to 2004: Stre ng the ning pe rio d 2005 to 2013: Re le a se a ve ra g e o f $125M pe r a nnum

Cumulative Ne t Re se r ve ($) Re le ase

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Ste a dy inc re a se o f re se rve re le a se s thro ug h 2013 c umula ting to $1.4B

200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Annual Re se r ve Re le ase % of Pr e mium

6

Re se rve re le a se s re sume in 2005; Ave ra g e re le a se ha s b e e n a b o ut 27% o f c urre nt ye a r e a rne d pre mium

• 10.0%
• 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Re por te d F r e que nc y 1977 to 2014

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0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Close d with Inde mnity Payme nt Ratio

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De c re a se s until mid nine tie s Uptic k a s re po rte d fre q ue nc y dro ps Ne g a tive c o rre la tio n b e twe e n re po rte d fre q ue nc y a nd CI P ra tio in time s o f ma jo r c ha ng e s o f Re po rte d fre q ue nc y; sta tistic a lly c re dib le whe n la rg e mo ve s in re po rte d

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Inde mnity Se ve r ity

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T re nds va ry fro m 0% to 3% F its do no t g ive lo w te st a lpha s sug g e sting we a k fits; o fte n no sig nific a nc e o r 0% tre nd b e st a ssumptio n I nde mnity se ve ritie s re ma rka b ly fla t o ve r 2004 to 2013 pe rio d

• 50,000

100,000 150,000 200,000 250,000 300,000 350,000 400,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

AL AE Se ve r ity

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T re nds va ry fro m 4% to 8% T re nds va ry g re a tly b y c a rrie r F its g ive lo w te st a lpha s sug g e sting stro ng fit

• 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pur e Pr e mium by L

• ss T

ype

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AL AE a nd UL AE mig ra ting to la rg e r pe rc e nta g e s o f L L AE pure pre mium o ve r the la st 14 ye a rs. Inc re a se d sha re is like ly to c o ntinue if c urre nt tre nds a re ma inta ine d

Ind e mnity 65.7% AL AE 28.5% UL AE 5.8% Ind e mnity 58.6% AL AE 34.3% UL AE 7.1% Ind e mnity 52.3% AL AE 39.9% UL AE 7.8%

1999 to 2003 2004 to 2008 2009 to 2013

Indemnity, ALAE, and ULAE Portions