Travelers 2004 Annual Report Download - page 111

Property book of business risk factors
Policy provisions mix (e.g., deductibles, policy limits, endorsements)
Changes in underwriting standards
Commercial Multi-Peril
Commercial multi-peril provides a combination of property and liability coverage typically for small
businesses and, therefore, includes both short and long tail coverages. For property coverage, it generally takes a
relatively short period of time to close claims, while for the other coverages, generally for the liability coverages,
it takes a longer period of time to close claims.
The reserving risk for this line is dominated by the liability coverage portion of this product, except
occasionally in the event of catastrophic or large single losses. The reserving risk for this line differs from that of
the general liability product line and the property product line due to the nature of the customer. Commercial
multi-peril is generally sold to smaller sized accounts, while the customer profile for general liability and
property include larger customers.
See the discussions under the property and general liability product lines with regard to reserving risk for
commercial multi-peril.
Commercial Automobile
The commercial automobile product line is a mix of property and liability coverages and, therefore, includes
both short and long tail coverages. The payments that are made quickly typically pertain to auto physical damage
(property) claims and property damage (liability) claims. The payments that take longer to finalize and are more
difficult to estimate relate to bodily injury claims. In general, claim reporting lags are minor, claim complexity is
not a major issue, and the line is viewed as high frequency, low to moderate severity. Overall, the claim liabilities
for this line create a moderate estimation risk.
Commercial automobile reserves are typically analyzed in four components; bodily injury liability, property
damage liability, collision claims and comprehensive claims. These last two components have minimum reserve
risk and fast payouts and, accordingly, separate risk factors are not presented.
Examples of common risk factors that can change and, thus, affect the required commercial automobile
reserves (beyond those included in the general discussion section) include:
Bodily injury and property damage liability risk factors
Trends in jury awards
Changes in the underlying court system
Changes in case law
Litigation trends
Frequency of claims with payment capped by policy limits
Change in average severity of accidents, or proportion of severe accidents
Subrogation opportunities
Changes in claim handling philosophies
Frequency of visits to health providers
Number of medical procedures given during visits to health providers
Types of health providers used
Types of medical treatments received
Changes in cost of medical treatments
Degree of patient responsiveness to treatment
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