Pricing the Hybrid

The current literature describes pricing and reserving of medical malpractice insurance as written on either an occurrence or a claims-made basis. In current practice, many policies allow the reporting of incidents before a claim is submitted, to attach the claim to the current claims-made policy. This creates experience with characteristics of both types of experience. This paper addresses the blend of the two types of experience based on the acceleration of the attachment of claims from their true assertion date back into the claims-made period. The goal is to assign exposure in proportion to expected claims, and to determine the number of claims and the related reserves to expect to be assigned to the current claims-made policy and to the residual tail exposure, and to reflect the change in the final pricing of the policy.