CAS News
Membership / Notices to Members
Publications & Research

Call for Monographs: Estimation and Incorporation of Claim Inflation in Actuarial Projections

The Call

The Casualty Actuarial Society, in conjunction with the CAS Monograph Committee, is pleased to extend a call for monographs on the topic of Claim Inflation (often commonly referred to simply as “Trend”). The purpose of this call is to develop a source of literature with emphasis on the educational and professional needs of actuaries to systematically and explicitly account for claim inflation with particular focus on its impact on P&C actuarial pricing and reserving.

Estimating claim inflation has historically received very little attention in the actuarial literature relative to the estimation of future development (e.g., LDFs and confidence intervals surrounding LDFs) despite the fact that trend estimation often has a significantly larger impact on actuarial indications than development - especially for very short-tailed lines. Even for long tailed lines, trend is a critical piece of the puzzle for many reserving methods and is especially important for pricing.  This call is intended to develop relevant literature on the topic into a comprehensive monograph. The authors are expected to discuss the most important subtopics in detail as well as a survey of additional subtopics and applications. It is also expected that the authors highlight the pros and cons various approaches to incorporating trend and the connections between them.

Some examples of specific topics these monographs may address include:

  1. Definitions, Analysis of Issues and Recommended Practices, and Communications and Disclosures consistent with ASOP 13
  2. Introduction and discussion of relative importance for various lines of business
  3. Discussion regarding the distinction between basic underlying economic trends and social inflation/other sources of claim inflation
  4. Basic Estimation - Economic Trends
  5. Basic regression methods - Exponential, loglinear transformations, other forms etc. for future projections
  6. Autoregressive and econometric models - observed historical trends for adjusting to current cost level vs future projections
  7. Frequency and severity vs pure premium estimation - benefits and drawbacks
  8. Primary vs Excess vs Layer trend
  9. Accident Year vs Calendar Year trend - testing for and overview of impacts upon development models
  10. Trends by component
    • Loss vs ALAE
    • Loss components by LOB - indemnity vs medical in WC, BI vs PD for Commercial Auto, etc.
    • ALAE components by LOB - adjusting vs legal
    • Wages and medical - general medical, surgeries, palliative care, etc.
  11. Seasonality Impacts - detection and adjustment
  12. Social Inflation - (Non-Economic)
  13. Other Considerations
    • Frequency and severity independence assumption testing
    • Dealing with frequency/severity correlations
    • Exposures - Inflation sensitive vs non-inflation sensitive - Impact on pure premium trend indications, rate change calculations, etc.
    • Benefits and pitfalls of various trend estimation based on available data
    • Adjustments for catastrophe losses (property and casualty) and adjustments for demand surge (property)
    • Impact due to changes in reporting patterns, settlement patterns, life expectancy
    • Discussion regarding differences between jurisdictions and how regional trends may differ from national trends
    • Identifying most appropriate industry trend
    • Credibility weighting indicated trend vs. industry trend
    • Quantification of estimation errors
    • Goodness of fit and statistical significance testing
    • Contribution to overall pricing and/or reserve variability
    • Further References and Open Source Software

All monographs are expected to either be accompanied by tools or code that allows the techniques discussed to be implemented, or include links to open source software and code for this purpose.

Topics noted within this Call for Monographs are not only of interest to many practicing actuaries but may also be of interest to the CAS Syllabus Committee. The Monograph Editorial Board especially welcomes proposals that enrich material currently used to train P&C actuaries. This means that monographs that are highly readable and are structurally amenable to having questions set from them are preferred. Authors are encouraged, but not required, to include examples and exercises that help teach the concepts being explained.

Authors must submit their work in accordance with the Guidelines for Submission of Monographs. The monographs will be subject to peer review prior to final acceptance. Authors of monographs that are accepted within the timeline outlined below may be invited to present their work at a related CAS Seminar or Meeting.

Scope

The monograph series seeks to present a balanced perspective with respect to alternative approaches to solution of a given class of problems and to foster critical thinking. Although original research is encouraged, these monographs are primarily educational. An individual monograph may focus on a single method or be a survey of various methods available and should include real-world examples, models, and spreadsheets. Approaches providing balanced and critical evaluation of alternative methodologies are particularly welcome. Conditions of optimal application and the advantages/disadvantages of use should be explored, making it easier for a practitioner to choose suitable methods.

Submission Guidelines

Monographs should be prepared in accordance with the Research Paper Template, and the procedures in the Guide for Submission of Monographs. Authors will be required to execute a copyright agreement form, which formally grants the CAS permission to publish the paper. Authors are encouraged to submit working templates in spreadsheets or other open source formats for models or methods discussed or developed in their papers. These spreadsheets and/or programs will be posted on the CAS Web Site along with the monographs.

Timetable
Timely submission according to the timetable outlined below would ensure that a paper will be ready for presentation at an upcoming, related CAS seminar or meeting.

1. Deadline for Proposals: By June 18, 2021, authors should submit proposals, including the title, a short description of the topic(s) to be addressed, and the approach that will be taken. Each proposal should be accompanied by the resumes of the author(s), indicating how their background, education, and experience bear on their qualifications to undertake the project. A list of the authors’ publications, along with authors’ contact information, should be included with the proposal, submitted via email to the Casualty Actuarial Society, droyston@casact.org.

2. Acceptance of Proposals: By September 3, 2021, the Committee will make a decision on all proposals and will contact authors accordingly.

3. Monitoring Progress: A committee member will be assigned to work with each author to monitor the paper’s progress and to provide general guidance for completion of the paper. Interim drafts, based on a schedule proposed by the author, may be requested.

4. First Draft: By December 3, 2021, a first draft of the completed paper will be submitted to the assigned committee member for review and comments.

5. Results of Initial Review: By January 7, 2022, preliminary comments on the first draft will have been forwarded to the author.

6. Final Draft: By March 4, 2022, the completed paper and a 200-word abstract must be received. Each paper will be screened to assure its quality of exposition and relevance to the call. Submitted papers are subject to rigorous peer review and copyediting.

August 5 2022, accepted monographs will be due to the CAS, to be published and be available on the CAS website. Some authors will be invited to present their papers at an upcoming CAS Seminar or Meeting.

Questions

Any questions on this Call may be addressed to Donna Royston at droyston@casact.org.