review of claims trends for liability insuranceclaims – aggregated claims reported and finalised...

Review of Claims Trends for Liability Insurance in Australia

Maggie Liu, Kundan Misra, Clement Peng

© Australian Prudential Regulation Authority

This presentation has been prepared for the Actuaries Institute 2014 General Insurance Seminar. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute and the Council is not

responsible for those opinions.

Insight into the NCPD

Overview • Current NCPD Publications • What’s new in this report • Some observations

– Exposure – Claims mix – Claim frequency – Average claim size – Claim size distribution

• Focus on breakdown by general nature of loss and by industry divisions

What’s currently being published • Policy

– Aggregated GWP, number of risks – In-force policies from 2003

• Claims – Aggregated claims reported and finalised triangles – Aggregated claims costs triangles – Open/Finalised claims from 2003 (include exposure from early

years) • Limited segmentation to protect the confidentiality of the triangulated

data – No breakdown by general nature of loss – No breakdown by claim size (large vs. non-large)

What’s New in this Report • Number of claims (reported and calculated IBNR)

– By general nature of loss; And – Jurisdiction or industry division

• Number and inflated costs of finalised claims – By general nature of loss; And – Jurisdiction or industry division or cause of loss or claim

size • Claim size distribution

– Large (inflated costs > $500K) vs. non-large – Fitted distribution

Exposure

Exposure and Year on Year Growth – National

• 25% total growth between 2005 and 2013

• 2% total growth between 2010 and 2013

* Exposure measured as number of risks written

Exposure Mix by Industry Division

Largest Industry Exposures as at 2013: • Property and

Business Services (28%)

• Construction (18%)

• Retail (14%)

* Exposure measured as number of risks written

Claims Mixture

Claims Mixture by General Nature of Loss

By number, as at 2013 • 65% are Property

Damage

• 30% are Bodily Injury

• Reduction for Bodily Injury from 2005 to 2007

* Number of claims calculated using Chain Ladder method

Claims Mixture by General Nature of Loss

By cost, as at 2013 • 57% are Bodily

Injury

• 31% are Property Damage

• Reduction for Bodily Injury from 2005 to 2007

* Finalised claims, inflated costs <=$500k

Proportion of Bodily Injury Claims by Number for Industry Division

Accommodation, Café and Restaurants • 60% are Bodily

Injury claims

Construction • 10% are Bodily

Injury claims

* Number of claims calculated using Chain Ladder method

Claim Frequency

Claim Frequency

Claim Frequency

* Frequency based on number of risks written

Claim Frequency – BI/PD/Other

* Frequency based on number of risks written

BI • Downward trend PD • Increase between

2005 and 2009 and decrease after 2009

Claim Frequency – PD, by Industry Division

* Frequency based on number of risks written

Property and Business Services • Stable Construction • 25% increase from

2005 to 2009 • Improving after

2009

Retail • Decreasing until

2010

Claim Frequency – BI, by Industry Division

* Frequency based on number of risks written

Largest industries • Frequency is decreasing

Accommodation, Café and Restaurant • Higher reported claims

compared to other years at the same development period. Many have been finalised as nil-claims

Manufacturing • Higher than usual

reported nil claims in 2011 – 2012; and

• Deterioration in experience

Average Claim Size

Finalised Claims Costs and Average Claim Size – Non-large

* Finalised claims, inflated costs <=$500k

• ACS dropped by 13% from 2005 to 2006

• Upward trend since 2009

Average Claim Size by General Nature of Loss

• Increase in ACS for both BI and PD

• Increase for Other between 2006 and 2008 mainly driven by BI + Financial losses claims.

* Finalised claims, inflated costs <=$500k

Large Claims

Proportion of Large Claims by Cost – BI/PD/Other

• Large claims contribute to about 30% of the total claims costs

• Similar proportions by cost for BI and PD, Slightly higher for Other

* Finalised claims, large defined as inflated costs > $500k

Proportion of Large Claims by Number – BI/PD/Other

• Increase between 2007 and 2008 for BI

* Finalised claims, large defined as inflated costs > $500k

Claim Size Distribution

Claim Size Distribution – Non-large

* Finalised claims, inflated cost <=$500k

• 33% of the claims cost no more than $100

• 72% of the claims cost no more than $5K

• 99% of the claims cost less than $500K

Claim Size Distribution – Large • 1% of the

claims cost more than $500K

• 0.08% of the claims cost more than $2M

• 0.05% of the claims cost more than $2M if exclude claims from older AYs

* Finalised claims, inflated cost >$500k

Questions

Email statistics@apra.gov.au