Travelers 2013 Annual Report Download - page 155

As discussed above, this line combines general liability and commercial property coverages and it
has been impacted in the past by many of the same events as those two lines.
The Company’s change in reserve estimate for this product line was 2% for 2013, 1% for 2012
and 5% for 2011. The 2013 change primarily reflected unfavorable loss experience for the liability
coverage for accident years 2008 through 2011, driven by higher than expected severity and defense
costs. The 2011 change reflected unfavorable loss development driven by late reporting of hail claims
incurred in 2010.
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.
The Company utilizes the conventional actuarial methods mentioned in the general discussion
above in estimating claim liabilities for this line. This is supplemented with detailed custom analyses
where needed.
Examples of common risk factors, or perceptions thereof, that could 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
• Changes in auto safety technology
• 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
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