The Impact of Quaker Analytics on the Reserving Process: A Game Changer for Actuaries
How can changes to the reserving process transform financial outcomes for insurance companies?
We posed this question to actuaries who have integrated Quaker Analytics’ models, which have demonstrably influenced reserve-related financials, including Incurred But Not Reported (IBNR) reserves.
Quaker Analytics’ models leverage historical claim payment data to enhance exposure recognition, particularly during initial reserving and subsequent reserve adjustments based on new or updated claim information. These models rely on factual data rather than opinions or best guesses, ensuring accuracy and reliability.
For many companies, this approach has revolutionized their reserving strategies. The objective is to establish the correct reserve amount at the earliest possible stage, often more swiftly than traditional methods. This shift has led clients to question the implications for actuaries, particularly when they observe higher reserves earlier in the claim process compared to previous periods.
An actuary from a leading commercial auto insurer shared insights on the initial challenges faced. The significant strengthening and accuracy of case reserves required careful management. Rather than overhauling actuarial processes immediately, the actuary opted for a gradual implementation of data-driven adjustments on a quarterly basis. This cautious approach avoided potential disruptions, such as:
The necessity to restate financial results
Complications in relationships with auditors and regulators
Extensive explanations to shareholders about the changes
Questions regarding the accuracy of prior period reports
By strategically timing the changes, the actuary achieved substantial improvements in reserving accuracy early in the claim handling process following First Notice of Loss (FNOL). This led to notable enhancements in the reserve-to-paid ratio, particularly for higher-value claims.
The data provided by Quaker Analytics facilitated several key outcomes:
Favorable adjustments to the IBNR reserving process
Increased confidence in reserve selections by the claims department
Positive impact on the probable change in value for escalating injury severities
Overall improvement in Loss Adjustment Expense (LAE) reserving
Reduction in LAE
Enhanced aggregate claim payment outcomes
The critical factor in this success story was the client's ability to offer Quaker a real-time feed to their claim data, including updates to claim notes.
Quaker data has proven to be transformative in the reserving process, providing actuaries with accurate insights that enhance financial stability and improve claim outcomes. By allowing for real-time data integration and applying gradual changes, insurance companies can achieve higher reserving accuracy and reduced expenses without significant disruption. As the industry continues to evolve, embracing advanced analytical models like what we offer at Quaker will be essential for staying competitive and ensuring financial accuracy.