• Individual Claims Simulation Model

    Services - Individual Claims Simulation Model

The Individual Claims Simulation Model (ICSM) quantifies the potential range in individual claim costs leading to greater transparency in the variability of ultimate aggregate claim costs and empowering better decision-making on loss reserving.

What is the ICSM?

The ICSM is a specialized loss reserving method that simulates the possible range in ultimate aggregate claim costs, based on individual claim level details and assumptions about claim frequency and severity. The frequency and severity inputs are probabilistic, which means that the ICSM simulates possible outcomes in proportion to their likelihood.  For example, extreme adverse loss outcomes are generated and analyzed, but are infrequent relative to more central outcomes.

What is the value of the ICSM?

A point estimate summarizes claim costs using a single number, such as the expected value or cost at a single percentile. However, in the real-world costs are variable and uncertain and are inadequately described using a point estimate. Management’s decision-making is improved by taking into consideration potential outcomes around the mean and especially at the extremes. The ICSM provides customizable statistics on the variability in potential outcomes, such as interquartile ranges and tail values-at-risk (TVaR) at multiple confidence levels.  The ICSM is versatile, with the ability to reflect specific policy level reinsurance detail, claimant-specific attributes such as age or injury type, multiple year trends and exposure changes, and changes in mix of business.

How can Huggins help?

The ICSM can be customized to include the books of business relevant to your organization’s loss reserving analysis. Huggins can improve management decision-making by smartly packaging ICSM output into dashboards, exhibits, and clear and easily understood reports, all of which can be customized to your specific circumstances and preferences.

The Huggins Advantage

Our firm’s philosophy centers on our commitment to the highest level of quality service delivered by quality people.  Our long tradition of providing responsive, technical excellence to our clients’ needs through an integrated team approach requires that we focus on quality in every aspect of every engagement.