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This project sought to analyze the phenomenon known as Social Inflation, taking a closer look at its definition and what factors affect it. Our team assessed the impact that Social Inflation may be having on the insurance industry through the use of models from the CAS monograph “Stochastic Loss Reserving Using Bayesian MCMC Models.” Utilizing the Correlated Chain Ladder model, our group was able to find a possible indication that Social Inflation has historically impacted the insurance industry. While we were unable to access more recent data, our team feels that the evidence of under-estimations for claim payouts were substantial enough to support this view. We have concluded that Social Inflation has negatively impacted the insurance industry, at least to some degree.
- This report represents the work of one or more WPI undergraduate students submitted to the faculty as evidence of completion of a degree requirement. WPI routinely publishes these reports on its website without editorial or peer review.
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