Travelers 2011 Annual Report Download - page 156

• Subrogation opportunities
• Degree of patient responsiveness to treatment
• Changes in claim handling philosophies
No-fault risk factors (for selected states and time periods)
• Effectiveness of no-fault laws
• 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
Personal automobile book of business risk factors
• Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.)
• Changes in underwriting standards
• Changes in the use of credit data for rating and underwriting
Unanticipated changes in risk factors can affect reserves. As an indicator of the causal effect that a
change in one or more risk factors could have on reserves for personal automobile, a 1% increase
(decrease) in incremental paid loss development for each future calendar year could result in a 1.1%
increase (decrease) in claims and claim adjustment expense reserves.
Historically, the one-year change in the reserve estimate for this product line over the last nine
years has varied from 9% to 3% (averaging 3%) for the Company, and from 4% to 0%
(averaging 2%) for the industry overall. The Company’s year-to-year changes are driven by, and are
based on, observed events during the year. The Company believes that its range of historical outcomes
is illustrative of reasonably possible one-year changes in reserve estimates for this product line.
Personal automobile reserves represent approximately 5% of the Company’s total claims and claim
adjustment expense reserves.
The Company’s change in reserve estimate for this product line was 3% for 2011, 0% for 2010 and
0% for 2009. The 2011 change reflected worse than expected severity for the 2007 - 2010 accident
years.
Homeowners and Personal Lines Other
Homeowners is generally considered a short tail coverage. Most payments are related to the
property portion of the policy, where the claim reporting and settlement process is generally restricted
to the insured and the insurer. Claims on property coverage are typically reported soon after the actual
damage occurs, although delays of several months are not unusual. The resulting settlement process is
typically fairly short term, although exceptions do exist.
The liability portion of the homeowners policy generates claims which take longer to pay due to
the involvement of litigation and negotiation, but with generally small reporting lags. In addition,
reserves related to umbrella coverages have greater uncertainty since umbrella liability payments are
often made far into the future.
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