Case Study – Loss Reserve Analysis
Problem
After changing its TPA, a client’s average case reserves on its open claims fell 20%. The client’s previous actuary did not recognize the decrease and incorrectly projected favorable losses in upcoming periods. Once reserves were strengthened not only to reach but exceed historical norms, the client’s ultimate losses increased 30% in an 18 month period.
RCS Action
Outcome
After identifying the issue and performing a side-by-side reserve analysis, RCS’s team was asked to become the reserving actuary for the client. In its first analysis, RCS’s method for recognizing the changes in case reserves led to an ultimate loss selection that was $6M lower than what would have been indicated using traditional development methods. These lower reserves remained justified over the next three years of development.