“The Future of Risk Classification in the Age of Predictive DNA-Based Testing”, Donald C. Chambers,January 1999

Abstract

The correlation among multiple lines of business plays an important role in quantifying the uncertainty of loss reserves for insurance portfolios. To accommodate correlation, most multivariate loss-reserving methods focus on the pairwise association between corresponding cells in multiple run-off triangles. However, such practice usually relies on the independence assumption across accident years and ignores the calendar year effects that could affect all open claims simultaneously and induce dependencies among loss triangles. To address this issue, we study a Bayesian log-normal model in the prediction of outstanding claims for dependent lines of business. In addition to the pairwise correlation, our method allows for an explicit examination of the correlation due to common calendar year effects. Further, different specifications of the calendar year trend are considered to reflect valuation actuaries’ prior knowledge of claim development. In a case study, we analyze an insurance portfolio of personal and commercial auto lines from a major U.S. property-casualty insurer. It is shown that the incorporation of calendar year effects improves model fit significantly, though it contributes substantively to the predictive variability. The availability of the realizations of predicted claims permits us to perform a retrospective test, which suggests that extra prediction uncertainty is indispensable in modern risk management practices.     

“Bounds for Ruin Probabilities in the Presence of Large Claims and their Comparison”, Vladimir Kalashnikov,April, 1999

Abstract

Performance measurement systems and report cards which attempt to measure and report the quality of care provided by managed health-care organizations, have become mainstream in health insurance markets as managed care penetration continues to increase. However, little is known about the impact formal plan evaluations have on the contracting and enrollment decisions made by health insurance purchasers and consumers. Information regarding the link between performance evaluations and enrollment is crucial for those charged with projecting future enrollments in and risk profiles of managed care organizations. This paper describes the performance measurement systems currently being used to evaluate managed care plans and reviews the empirical literature for evidence regarding the impact of measures on plan enrollments.     

“The Time of Recovery and the Maximum Severity of Ruin in a Sparre Andersen Model,” Shuanming Li,October 2008

Abstract

In a first-party recovery scheme for automobile property damage, the first-party insurer compensates not-at-fault vehicular damage. In this scheme, adjusters may not have the incentive to assign liability when the driver is, in fact, at fault for the accident. This is due to adjusters not having to coordinate with a third-party adjuster, and, for insureds that carry collision coverage, the assignment of fault does not appreciably affect the compensation paid out. This in turn reduces the effectiveness of the experience-rating component of the insurance premium. Empirical evidence that supports the presence of incorrect fault assignment is provided. A stochastic model of experience rating analyzing the impact of incorrect fault assignment on driving record classes confirms that low-risk insureds pay more for insurance than if fault was correctly assigned.     

“Actuarial Issues in the Novels of Jane Austen”, Daniel D. Skwire,January 1997

Social security systems for old age have been explicitly studied in a public choice framework for more than 30 years. They illustrate extremely well the problems of allocating economic resources through a system of voting. Despite actuarial interest in state pension systems and despite the actuarial calculations that are needed to understand long-term public choice trends, there is almost no reference to public choice economics in the actuarial pensions literature. It can be argued that pension systems currently provide some of the most significant threats to the long-term budget positions of developed countries, a point that was made in the Nobel Laureate lecture of Professor James Buchanan over 24 years ago. In this article, we look at the costs and benefits that will be faced by different groups of voters as a result of state pension reform in the United Kingdom. The results of this analysis suggest that a majority of the electorate will have a strong financial interest in opposing state pension reform except where reform involves raising retirement ages. These results are in accordance not just with theoretical work but with other empirical work and practical observations.