PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

658 ESTIMATING THE WORKERS COMPENSATION TAILAPPENDIX CINCORPORATING THE STATIC MORTALITY MODEL INTO THEINCREMENTAL PAID TO PRIOR OPEN CLAIM METHODSECTION C.1.OVERVIEWGiven the complexity of this method, Table C.1 provides aroad map to the key steps involved in the application of themethod and the location of tables and narrative describing thosesteps. The method was originally introduced in Section 3 bypresenting Step 7 since this step is easily understood.Table C.1 lists the key steps of this method in the order inwhich they were applied, which is not necessarily the order inwhich they are presented in this appendix.This Appendix consists of five sections: (1) Overview;(2) Derivation of Number of Open Claims at the End of EachDevelopment Year; (3) Selection of Representative Values ofIncremental Paid to Prior Open Claim; (4) Basis of 9% Assumptionfor Future Rate of Medical Cost Escalation; and (5) Derivationof Assumed Claim Reporting and Closure Patterns.SECTION C.2.DERIVATION OF NUMBER OF OPEN CLAIMS AT THEENDOFEACHDEVELOPMENTYEARThe first part of this Appendix describes the derivation of theestimated number of PD claimant deaths shown in Column (3)of Table 3.4. Such estimates also directly become the numberby which the total number of open claims declines for each developmentyear after the 20th year. After that year, it is assumedthat no new claims will be reported and that the number of claimclosures for reasons other than death will be cancelled out by thenumber of reopened claims for each development year.The survival probabilities for each development year were derivedfrom a claimant mortality model and these were compared