Which factors can be used to derive projected loss payment patterns?

• A. Pricing information only
• B. Combination of previous experience and industry benchmarks
• C. Previous experience only
• D. Industry benchmarks only

Answer: (B)

To project loss payment patterns you should blend what happened in the portfolio with what’s happening in the broader market. Internal experience provides the actual timing and amount of payments observed for the claims you already have, reflecting your portfolio’s mix of lines, claim handling, settlement practices, and development behavior. But that alone can be distorted if your portfolio changes quickly or if data is sparse. External benchmarks give a broader reference for typical payment pacing across similar lines and years, helping you adjust for general industry trends, inflation in claim costs, and changes in litigation or settlement patterns that your own data might not yet reveal. Bringing these together yields a more robust, stable pattern than relying on internal data or benchmarks alone. Focusing only on pricing information misses the timing of cash flows; using only previous experience can overfit to your current book; using only benchmarks can ignore portfolio specifics.