Travelers 2014 Annual Report Download - page 147

Table of Contents
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
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Changes in the underlying court system
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Changes in case law
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Litigation trends
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Frequency of claims with payment capped by policy limits
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Change in average severity of accidents, or proportion of severe accidents
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Changes in auto safety technology
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Subrogation opportunities
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Changes in claim handling philosophies
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Frequency of visits to health providers
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Number of medical procedures given during visits to health providers
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Types of health providers used
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Types of medical treatments received
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Changes in cost of medical treatments
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Degree of patient responsiveness to treatment
Commercial automobile book of business risk factors
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Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.)
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Changes in mix of insured vehicles (e.g., long haul trucks versus local and smaller vehicles, fleet risks versus non - fleets)
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Changes in underwriting standards
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 commercial automobile, a 1% increase (decrease) in incremental paid loss development for each future calendar year could
result in a 1.2% 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 –10% to 7% (averaging –
2%) for the Company, and from –3% to 3% (averaging –1%) 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. Commercial automobile reserves represent approximately 7% of the Company's total claims
and claim adjustment expense reserves.
The Company's change in reserve estimate for this product line was –2% for 2014, 1% for 2013 and 7% for 2012. The 2014 change reflected
better than expected loss experience for accident years
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