Changes in the guidelines insurance companies give their claims adjusters for setting what will affect development patterns of insured losses?

Question

Options

• Aloss reserve liabilities
• Bconfirming coverage
• Ccase loss liabilities
• Dlitigated liabilities

• A
  13% (4)
• B
  10% (3)
• C
  73% (22)
• D
  3% (1)

Explanation

Case loss reserves (option C) are the individual claim reserve amounts that adjusters set on open claims, directly following company guidelines. When those guidelines change - say, a company instructs adjusters to reserve more aggressively or more conservatively - the initial reserves set on claims shift, which creates artificial development in the historical loss triangles that actuaries use to project ultimate losses.

Why the distractors are wrong:

• A (loss reserve liabilities): Too broad - this umbrella term includes IBNR and bulk reserves that actuaries calculate, not just what adjusters individually set per claim. The precise term for adjuster-set amounts is case reserves.
• B (confirming coverage): Coverage confirmation determines whether a claim is payable, not how much is reserved for it. It doesn't drive development pattern changes.
• D (litigated liabilities): Adjuster guidelines apply to all open claims, not just litigated ones. This is too narrow a subset to explain broad development pattern shifts.

Memory tip: Think "case-by-case" - adjusters evaluate each claim case by case to set a reserve, so those individual reserves are called case loss reserves. Guideline changes = case reserve changes = development pattern distortion.

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