Several writers have lamented the problems of working only with annual statement data, which
now has a definitional change in the trends. Others have talked about varying internal definitions.
The last item I saw, noted that there were supposedly 3 or more different definitions between the
NAIC, bureau reporting, and reinsurance contracts.
All of this discussion stems from the same source. If you set up your systems to identify certain
amounts as either ULAE or ALAE then you will (and I underline will) have a problem sometime,
either now or in the future. This is because none of the items discussed are either ULAE or
ALAE.
Take the example of the expense of using outside adjusters. If you have systems (and most of us
do) that identify these expenses as ALAE and need to change them to ULAE, then you have
additional expense and the potential for problems. But these are not ULAE and they are not
ALAE. What they are is outside adjuster expenses. Good data management demands that we
identify items for what they are. If these amounts are identified in the system as &outside
adjuster fees8 then there is virtually no expense or confusions in reporting them. With a simple
table entry we could direct them to ULAE for the annual statement, ALAE for bureau reporting,
and to exclude them entirely from certain reinsurance contracts.
Rich Nichols, FCAS
Executive Committee, Insurance Data Management Association
www.Ins-Data-Mgmt.org (or link from the CAS page)
Visit the CAS Web Site at http://www.casact.org
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