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Claims Applications of GLM

Explore the uses and benefits of Generalized Linear Models (GLM) in claims management, including case reserving models, severity analysis, benchmarking, and evaluation of external claim service providers. Discover how GLM helps measure variability in severities and test trends and stability over time.

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Claims Applications of GLM

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  1. Claims Applications of GLM Rob Walling CAS GLM Seminar October 4, 2004

  2. Overview • What types of claims are most applicable? • What factors matter? • Why does GLM help?

  3. Basic Formula Case Reserving Model • BOP Property Losses • Initial Case Reserve at First Report • Water Claims - $2,500 • Wind/Hail claims - $5,000 • All Others - $1,700 • Large Property Losses initially set at $25,000 • Annual Adjustments for Trends

  4. Suitable Claim Types • Large Volume of Claims • Less Variability in Severities • Known Factors Differentiate Severities

  5. Suitable Claim Types - Commercial • Non-Severe Property Claims • Commercial Auto Physical Damage • Commercial Auto Property Damage • Commercial Auto PIP • General Liability Property Damage • OL&T Minor Bodily Injury • Workers Compensation Medical • Workers Compensation Temporary Total and Minor Permanent Partials • Products Liability???

  6. Factors that Impact Severities • Geography (State or Regional Courts) • Time (Inflation, Settlement Lags) • Claimant Characteristics (Age, Class) • Insured Characteristics (Vehicle Weight) • Attorney Involvement • Preferred Claim Network (Medical, Glass, Auto Repair, Attorney) • Other Claims Features (Arbitration)

  7. Medical Malpractice Claims Severities

  8. Claim Severity by Injury Type Over Time

  9. Severity Trends – Occurrence Year

  10. Severities by Settlement Lag

  11. Differences by Age & Sex

  12. Impact of Attorney Involvement on Claim Severity

  13. Profiles by Resolution Method

  14. Typical Causes of Loss • Property • Fire & Lightning • Windstorm & Hail • Water Damage • Burglary & Theft • Inland Marine • Liability • Bodily Injury • Medical Payments • Property Damage

  15. Typical Causes of Loss • Workers Compensation • Medical • Temporary Total • Minor Permanent Partial • Liability • Bodily Injury • Medical Payments • Property Damage

  16. Severities By Claim Type

  17. Why Use GLM for Formula Case Reserves? • Interactions Matter • Allows Testing of Trends and Stability Over Time • Measures Variability in Severities

  18. Impact of Attorney Involvement on Claim Severity

  19. Severities by Protection Class

  20. Other Claims Applications • Benchmarking of Claims Offices • Evaluation of External Claim Service Providers • Impact of Defense Costs by Claim Type

  21. ALAE / Loss+ALAE by Settlement Lag

  22. Non-Economic Damages by Occurrence Year

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