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Personal Auto: Special Reserving Issues

Personal Auto: Special Reserving Issues. Casualty Loss Reserving Seminar Steven G. Lehmann Atlanta, GA September 11, 2006. New Jersey Supreme Court Decisions. DiProspero v. Penn And Serrano v. Serrano June 14, 2005. Background. I. Oswin v. Shaw (1992)

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Personal Auto: Special Reserving Issues

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  1. Personal Auto: Special Reserving Issues Casualty Loss Reserving Seminar Steven G. Lehmann Atlanta, GA September 11, 2006

  2. New Jersey Supreme Court Decisions DiProspero v. Penn And Serrano v. Serrano June 14, 2005 Pinnacle Actuarial Resources, Inc.

  3. Background I. Oswin v. Shaw (1992) Under the New Jersey no-fault tort threshold, in addition to proving that the injury fell within one of the nine verbal thresholds, the victim had to prove that the injury had a serious impact on the life of the victim. Pinnacle Actuarial Resources, Inc.

  4. Background • The Automobile Insurance Cost Reduction Act (AICRA). March, 1998. Those policyholders who elect the “limitation on lawsuit” threshold receive lower premiums in return for limiting their right to sue for non-economic damages. Under AICRA, one may only sue for non-economic losses if the victim suffers bodily injury resulting in one of six defined categories: Pinnacle Actuarial Resources, Inc.

  5. Background Six Defined Categories • death • dismemberment • significant disfigurement or scarring • displaced fractures • loss of a fetus • permanent injury other than scarring or disfigurement Pinnacle Actuarial Resources, Inc.

  6. The Supreme Court Decision: • Issue was whether the “serious life impact” test applies to accidents under AICRA • Court decided that it did not • Potentially far reaching decision increasing auto insurance costs in New Jersey Pinnacle Actuarial Resources, Inc.

  7. Effect of the Decision: • Pinnacle Actuarial Resources was originally retained by the Save Choices for New Jersey Drivers group in fall of 2003 • Charge: conduct an independent actuarial study to determine the cost implications of two bills introduced in New Jersey to eliminate the “serious life impact” test Pinnacle Actuarial Resources, Inc.

  8. Effect of the Decision:(continued) • Report was based on a special survey of automobile closed claim and the 1999 IRC Study • As a result of the DiProspero v. Penn decision, Pinnacle was asked to update the study • Revised Pinnacle Report, November 2005 Pinnacle Actuarial Resources, Inc.

  9. Effect of the Decision:(continued) • Entitled: New Jersey Automobile No Fault Study -Analysis of Impact of the Elimination of the Serious Impact on One’s Life Requirement for Tort Recovery in New Jersey • Used original closed claim study plus 2003 IRC study Pinnacle Actuarial Resources, Inc.

  10. Effect of the Decision:(continued) • Concluded that the best estimate of the impact of the Supreme Court decision is an increase in Bodily Injury and UM/UIM costs for drivers selecting the verbal no-fault threshold option of between 36% and 57% Pinnacle Actuarial Resources, Inc.

  11. How does all this affect the Loss and Loss Adjustment Expense Reserves for 2005 and Beyond? Pinnacle Actuarial Resources, Inc.

  12. More claims crossing the threshold i.e., claims frequency • Possible impacts on claim severity • Impacts on expected loss ratios used in Bornhuetter-Ferguson methods • Potential changes in loss development patterns • Reopened claims potential Pinnacle Actuarial Resources, Inc.

  13. What has happened since June of 2005? Pinnacle Actuarial Resources, Inc.

  14. Fast Track Plus TM Private Passenger Auto Loss Data and TrendsNew Jersey Pinnacle Actuarial Resources, Inc.

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