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This paper serves as a basic guide to economic scenario generators (ESGs), with an emphasis on applications for the property-casualty insurance industry. An ESG is a computer-based model that provides simulated examples of possible future values of various economic and financial variables.
Rarely have casualty actuaries needed, much less wanted, to work with complex numbers. One readily could wisecrack about imaginary dollars and creative accounting. However, complex numbers are well established in mathematics; they even provided the impetus for abstract algebra.
This study note expands on some of the examples found in Chapter 3, “Individual Risk and Rating,” by Margaret Wilkinson Tiller in Foundations of Casualty Actuarial Science
This paper explores the concepts underlying the valuation of an insurance company in the context of how other (non-insurance) companies are valued. Among actuaries, the value of an insurance company is often calculated as (i) adjusted net worth, plus (ii) the present value of future earnings, less (iii) the cost of capital.
Probably the most universal hallmark of the scientific mind is a persistent penchant for pigeonholing.
The paper submitted by Mr. Faust describes one rate making technique and it creates the impression that the problem is a rather simple one. This may be the case where the contract benefits are more or less uniform, i.e., where there is only one coverage for group contracts and only one coverage for non-group contracts.
It is indeed a pleasure, to have a man with Mr. Kormes’ experience review my paper.
Mr. Kormes indicates that I created the impression that the problem is a simple one. I don’t see how anyone who read the "Foreword" of my paper could obtain this impression. The rating problems are quite complex. In order to keep my paper to a reasonable length, I selected one rating problem.
Mr. Foster has done an excellent job of describing the intricate details of the Boiler and Machinery Premium Adjustment Rating Plan of the National Bureau of Casualty Underwriters. Although this plan has limited use, it is a very important part of the Boiler and Machinery line of insurance because, as Mr.
The purpose of this paper is to set forth in an orderly fashion, a summary of certain aspects of the work done in compiling the 1965 version of Table M. It will be assumed that the reader has a basic knowledge of Table M and its use in obtaining insurance charges for retrospective rating plans. This report will be presented in a fashion that will imply that we went straight as an arrow from the problem to the solution.
The current paper by LeRoy Simon, which reports the trials and tribulations, as well as the methods and procedures, by which the National Council's Subcommittee to Review Table M developed the new 1965 Table M is one which is sorely needed and which will avoid the very unfortunate situation which occurred when Table M was modified in 1954 without any concomitant paper appearing in the Proceedings. This paper is important.
Mr. Simon's work is a modern "labor of Hercules." Both he and his employer, which made its facilities so readily available for this project, well deserve the epithet "good citizen" from the entire casualty insurance industry. My remarks are not intended to encompass the job recently completed, but, except for a mathematical note appended, are designed to take up from the point where this paper leaves off.
As most readers are aware, the growth of Blue Cross plans in the last fifteen years has been phenomenal. Not only have such plans grown in terms of numbers of persons covered but also in terms of complexity of operation. The actuarial problems of Blue Cross plans have also increased. There is a large variety of coverages available and premiums must be computed so that they are both adequate and competitive.
In view of the current widespread interest in the field of hospital, surgical, medical coverage and its attendant cost, it seems desirable that there be a free interchange of ideas between the insurance industry and Blue Cross-Blue Shield in order to facilitate expansion of coverage to as large a segment of the United States population as possible.
Mr. McLean's comprehensive paper entitled "An Actuarial Analysis of a Prospective Experience Rating Approach for Group Hospital-Surgical-Medical Coverage" outlines briefly the history of experience rating of these coverages, and follows with a rather complete description of the experience rating plan now in effect in his Blue Cross Plan.
Currently, there are five major data collection programs at NCCI.
Annual Financial Call Data – Aggregate premium and loss data (experience by state) primarily used to calculate overall loss cost and rate level changes.
Workers Compensation Statistical Plan (WCSP) Data – Individual policy loss and exposure (payroll) information collected with detail by classification, primarily used to calculate loss cost relativities and experience rating modif
The paper provided by Mr. Morison gives us an excellent chronological summary of the progress and results of the 1965 expense study by size. This paper will remain a permanent record for members and students alike of the Casualty Actuarial Society of the difficult and time-consuming labors performed to bring the study to completion.
Mr. Morison has given his account from the inside of the industry activities relating to the study of workmen’s compensation expenses by size of risk.
This report is a chronological presentation of the steps taken from the time of the first indication that a study of expenses was in the offing until, three years later, the deliberations of no less than six committees culminated in a complete revision of the expense provision used in workmen’s compensation ratemaking.
It is certainly gratifying to men in the accident and health business to see three papers on that subject presented at one meeting of this Society. Mr. Miller in his paper has gone back to the origin of non-cancelable health and accident insurance in this country and, therefore, his paper should be of particular value to students of that subject.
Certain losses, the incident of which are unforeseen, do or may, sooner or later, fall to the lot of the individuals comprising any group of men. The chief function of insurance is to distribute these losses among all the members of the group so that no great strain will be borne by any individual.
The authors of the very thorough and illuminating paper which is before us for discussion have indicated the explanatory character of their work by its title. Hence, any discussion of it should be limited to the effectiveness with which they have bridged the gap between themselves, thoroughly familiar with every step of the process, and the reviewer, seeing only the final result.
A schedule rating plan as an instrument of rating a risk for workmen's compensation insurance should establish the relativity of hazard between individual risks of the same manual classification to the extent that the physical condition of the risk influences its experience. How far the Industrial Compensation Rating Schedule does accomplish this purpose is a matter of conjecture.
We are now experiencing an era of automobile liability ratemaking in which it is an absolute necessity that adequate territorial rates be established and maintained. In developing rates by territory the question of what experience is to be used is definitely a major factor.
Automobile registrations in the United States now exceed 67,000,000, an increase of 270% in the last three decades. The premium for bodily injury and property damage liability insurance has increased from $250 million to more than $3.0 billion during the same period.
