Rating Claims-Made Insurance Policies

In this paper, we propose to discuss the claims-made approach to pricing Medial/Professional Liability insurance. We will begin with a brief summary of the historic context which lead the largest medical malpractice writer in the country (St. Paul Fire and Marine) to switch its book of business to claims-made. The we will describe in depth the claims-made concept itself: how it works, how it differs from traditional occurrence coverage, what its inherent advantages are, and what special problems it presents and how these might be resolved. In particular, we will compare the accuracy of claims-made and occurrence ratemaking under varying assumptions about a changing claim environment. We will outline special features of The St. Paul filings which distinguish them from previous claims-made filing by other carriers. Finally, we will highlight special analytic tools which were developed to price claims-made coverages, and will show how these same tools can aid the actuary in pricing and reserving occurrence coverage as well. Let us look back at the time before claims-made to see how the decision to offer this coverage evolved. Claims-Made/LOB-Medical Malpractice/Reinsurance