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Chapter 12. Latent and Disease Claims (Development Stages: (Unknown -…
Chapter 12. Latent and Disease Claims
Definition:
Unknown to Underwriters when product was written
Or very long to develop
Be clear in definition
Characteristics:
Usually bodily injury of some time
Can take many years to develop
Unknown at time of product
Pharmacological or exposure to work environment or product
Development Stages:
Unknown - nothing is known, very vague guess, then adjust as we find out more
Potential - base on historic latent claims, still in legal defence stage
Emerging - legal liability is better established
Top down approach - start at industry estimate and work down
Bottom up approach - estimate on a per policy basis
Emerged/Closed - fully emerged or developed in a predictable way
Things to consider:
Changes to legal environ
Incomplete policy records
Propensity to claim once emerged
Increased longevity
Underwriting Potential Latent Claims
Historic Rate by class of business - higher for liability than property (although property includes some liability)
Nature of Cover - loss occurring more exposed than claims made
Exclusions
Industry being covered
Territory - due to litigation, propensity to claim and occurrence of event
Employer's Liability:
Compulsory cover for accidents and injuries at work
Occupational Disease in Mine Works Act (ODMWA) -
mainly cardio-respiratory disease
Up to 75% loss of earnings for Tuberculosis
(Ax12)xB - A = monthly earnings up to R2,000
B = annuity factor depending on degree of disability
Removes the right to sue
Commissioner for Occupational Injuries & Disease (COIDA):
All workers for injury and disease (except mine worker's for disease)
Temporary Disablement up to 75% of earnings for up to 12 or 24 months
Permanent Disability - loss of earnings in a lump sum or monthly benefit
Disputes:
Process varies by country
Medical diagnosis or legal advertising - reduce delay
Complex dispute between insurer/reinsurer more so for XOL than for Prop - increase delay
Retrocession disputes (like above)
Dispute about timing of incident or illness sustained
Information Available:
Consider materiality, proportionality and uncertainty
Underlying Claims Info:
Identity
DOB
Date Reported
Details of involvement (site worked, etc)
Amounts Paid (in expenses, indemnity)
Dates of payments
Area
Reserve
Claim open or closed
Sometimes just number of open claims by history
Historic claims details (open, expenses, indemnity, zero claims indemnity)
Need to split the loss by when insurance was held and how the injury/disease developed over time
Does reinsurance respond on an aggregate basis or on a pro-rata basis - they pay as losses occur
Understand what an "Outstanding" claim is:
This will vary by insurer, some will report them straight away, others once they have negotiated
Some may wait for more info. or adjust the figure for uncertainty
Reserving:
Average Cost per Claim - using exposed numbers to get claims number estimate, then an expected cost.
Can split into groups
Calculate claim size by using age, earnings, marital status and dependents. Loss of earnings up to retirement and loss of pension. Include emotional damage, funeral and legal costs.
Loading and Benchmark Approach - load outstanding or incurred claims. Where class is small compared to total business
Consider which base to load, how they change over time, processing times may affect them, delay in claims
Characteristics of the claim itself - does it grow over time as more reported
Size and industry of company will play a role in reporting times
Claims Projection and Modelling - start at a macro (nationwide) level then work your way down using medical studies.
Take account that it is only a model and use as a reference point
Specific Claims Evaluation - Actuaries act as an adviser to those managing the claims.
Need to understand the uncertainties, ambiguities, RI effects, policy wording uncertainties
Claimants go after the largest possible payout
Gain probable outcomes from required parties with probability estimates
Remember:
The insured is the company, so will not have data on each employee, or product user (like for drugs or asbestos). So we only et info once the company gets info. Very removed from the initial claim.