RE: Stanard questions
Sce, Michael ( (no email) )
Thu, 8 Oct 1998 21:48:02 -0400
> ----------
> From: Jim Shoenfelt[SMTP:jimshoenfelt@amdyne.net]
> Reply To: Jim Shoenfelt
> Sent: Thursday, September 03, 1998 9:22 PM
> To: Exam7
> Subject: Stanard questions
>=20
> Why does Stanard's method of generating losseson oaverage lead to
> underreserving by (Ip/Ir) - inflation betweenreport & pmt?
>=20
ANSWER:
> Sometimes he uses no inflation. Even when he uses inflation, there
> are other types of real-life reserve changes that he doesn't =
consider;
> e.g., systematic reserve change based on nature of the claim. These
> tend to inflate the claim.
> =A0
> And why does Stanard say the the BornhuetterFerguson modified method
> has upward inherent bias in each age-to-age ultimate prediction?
> =A0
> This happens because the LDFs are already biased upwards. If
> inflation is out of the picture, (1 - 1/LDF) is too high.
>=20
> Hope this helps.
>=20
>=20