Our research investigates the relationship between per-occurrence and aggregate deductibles, with a focus on devising a simplified methodology for estimating loss elimination percentages, particularly pertaining to Table M. Per-occurrence deductibles require the insured to pay for a portion of each loss event. Aggregate deductibles accumulate losses over a defined period, upon reaching a certain threshold the deductible amount is subtracted from the aggregate losses and the insurance coverage begins. Therefore, an aggregate deductible represents the maximum deductible amount that a policyholder must pay for claims over the specified period. Table M is a widely used tool for determining the extent of loss mitigation through imposing per-occurrence and aggregate limits. Table M is built using entry level ratios and associated aggregate losses categorized by policy size or limit. Typically, this table is generated by modeling aggregate loss distributions using parameterized functions, which offers flexibility for simulations. Actuaries establish Table M by fitting claims data to similarly sized risk groups, ensuring accuracy in estimating loss elimination. However, limitations may arise when data is insufficient for creating credible groups, emphasizing the importance of analyzing entry level ratios to mitigate potential errors. Our primary goal is to propose an improved methodology for Table M, simplifying calculations, therefore facilitating informed decision-making for insurers. We utilized Excel to simulate various distributions while applying different per-occurrence and aggregate deductibles, allowing for comprehensive analysis of their effects on loss reduction percentages. Through these simulations, we derived enhanced methodologies for calculating and presenting Table M charges in a more comprehensive manner.

• 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.

Creator

• Barksdale, Abigail
• McMorrow, Allison

Publisher

• Worcester Polytechnic Institute

Identifier

• E-project-042224-105838
• 121273

关键词

• actuarial
• deductibles
• loss models
• limits

Advisor

• Posterro, Barry John
• Abraham, Jon P.

Year

• 2024

Date created

• 2024-04-22

Resource type

• Major Qualifying Project

Major

• Actuarial Mathematics

Source

• E-project-042224-105838

Rights statement

• In Copyright