The Scorecard System

The basic concept of a “scorecard system” has been part of the actuarial literature for many years. This concept measures the accuracy of previously estimated losses against the most current estimates. Retrospective or “after the fact” tests are other names which convey the concept. The keeping of a scorecard and following the outcome year by year or quarter by quarter is the basic idea. Whenever any loss reserving method is applied to a given set of data, there is a need to test. The scorecard system presented in this paper tests loss reserve methods, thereby helping the actuary determine the most accurate reserving method for a specific application. It is an excellent tool to be used any time, but it is specifically applicable to the “first-time” loss reserving situations. The presentation is called the “scorecard” system because it keeps the score “inning by inning” until the “game is over” and all the losses are paid.