Question

How can the impact of fundamental changes on claims be addressed in reserve estimation?

a.

By using sophisticated statistical modelling only

b.

By relying solely on simple arithmetic calculations

c.

By developing a deeper understanding of driving factors and making judgments

d.

By ignoring the potential effects of fundamental changes

Posted under IC 14 Regulations of Insurance Business

Answer: (c).By developing a deeper understanding of driving factors and making judgments Explanation:The impact of fundamental changes on claims can be addressed in reserve estimation by developing a deeper understanding of driving factors and making judgments. This involves analyzing factors such as inflation rates, rebuilding costs, legal frameworks, court awards, and medical costs, and assessing how they may change in the future to adjust reserve estimates accordingly. This approach allows for a more nuanced and informed estimation process beyond just mechanical calculations.

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Q. How can the impact of fundamental changes on claims be addressed in reserve estimation?
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