Extended Service Contracts

Automobile extended service contracts (ESC’s) have been in existence for many years. Due to the nature of the coverage, an insurer may not know the actual results for a particular book for some time after the book has been in place. This paper discusses this coverage and unique characteristics of ESC’s that should be recognized when analyzing experience for an ESC program. The paper also discusses some approaches that have been used to address these problems and to derive reserve and rate estimates for ESC programs. Keyword: LOB - Automobile, Extended Service Contracts