IAI Actuarial Core Principles · Economic Modelling · Run-off triangles
An actuary applies the average cost per claim method to a run-off triangle. Which combination of inputs does this method project separately to reach ultimate claims?
The average cost per claim method projects claim numbers and average claim amounts separately, typically with inflation adjustments, and multiplies them to get ultimate claim cost. This lets frequency and severity be analysed and projected independently.
- AClaim numbers and average claim amountsCorrect
- BPremium and expense ratios
- CInterest rates and inflation only
- DCase reserves and paid claims only
- Reinsurance recoveries and tax
Explanation
The average cost per claim method projects the number of claims and the average cost per claim separately, then multiplies them to obtain ultimate claims. The other options are not the components of this method.
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