Travelers 2013 Annual Report Download - page 160

Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the
required personal automobile reserves (beyond those included in the general reserve discussion section)
include:
Bodily injury and property damage liability risk factors
• Trends in jury awards
• Changes in the underlying court system and its philosophy
• 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
• 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 2%) for the Company, and from 4% to 1%
(averaging 3%) 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 1% for 2013, 2% for 2012 and
3% for 2011. The 2012 change was primarily driven by higher than expected bodily injury severity for
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