Value of Interacting with the Claim Department: The

Casualty actuaries have long recognized that changes in claims patterns can create distortions in loss projections and loss reserve estimates. Various actuarial methods are used to detect, mitigate and adjust for (or avoid) these distortions. The actuarial literature provides considerable guidance and numerous techniques in this regard, and this paper does not re-cover this ground. This paper describes and illustrates important benefits of regular and ongoing interaction between casualty actuaries and Claim Department personnel, and emphasizes that this is a two-way street. Qualitative and quantitative input from the Claim Department can be critical in helping the actuary understand, appropriately interpret, and even anticipate changes that affect the actuarial data and actuarial projections. The actuary's work, in turn, can serve as an effective diagnostic to identify potential macroscopic changes in the claims arena -- including mix changes, reporting patterns, claim management issues, case reserving changes, and closure/settlement patterns. With these diagnostics in hand, the actuary plays a key role in the early identification, communication, analysis and resolution of unwanted, unintended, or unrecognized claim changes that may have important business consequences extending well beyond the Actuarial Department. The message here is that the actuary must be an active -- and interactive -- part of the management team. Input from the Claims Department is arguably a necessary ingredient to the actuary's work. But when the actuary provides insight to the Claims Department, the actuary can add value to the entire organization.