Battle Card 19: Question # 8. Reasons to choose smallest margin for claims development.
The answer in the battle card refers to commutation & stop-loss coverage. I am wondering if it is reasonable to select the lowest margin on the basis of these more common reasons:
1) Short-tail LOB
2) High Freq/Low Sev data
3) stable and consistent claims management
Since the questions asks for reasons to choose the lowest margin, and these items would seem to indicate a lower risk margin required, is it acceptable to use this list? If not, why?
Thank you!
Comments
Your reasons would be supportive of a lower margin. I recalled the CAS asking something similar in Fall 2015 question 25 (https://www.casact.org/admissions/studytools/exam6c/f15-6c.pdf). As per the examiner's comments: "Candidates were expected to identify an extreme situation where the stated ranges would be too high. This was more difficult for candidates, and many gave examples of lower-risk reserve estimates that were not extreme enough to warrant a selection below the range."