Which of the following is an issue with using Part 2-4 information to develop losses?

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Multiple Choice

Which of the following is an issue with using Part 2-4 information to develop losses?

The main issue is the subjectivity in how Schedule P Part 2-4 data are allocated. The numbers you see come from the person preparing the report and reflect their interpretations of how to assign losses, expenses, and other amounts to the various accident years and development periods. Because those allocations can differ based on the preparer’s judgments and methods, the resulting loss figures may not be directly comparable across organizations or even across time within the same organization. This lack of consistency and potential bias makes using Part 2-4 information for developing losses risky, more so than concerns about the amount of data or whether IBNR is included.

The main issue is the subjectivity in how Schedule P Part 2-4 data are allocated. The numbers you see come from the person preparing the report and reflect their interpretations of how to assign losses, expenses, and other amounts to the various accident years and development periods. Because those allocations can differ based on the preparer’s judgments and methods, the resulting loss figures may not be directly comparable across organizations or even across time within the same organization. This lack of consistency and potential bias makes using Part 2-4 information for developing losses risky, more so than concerns about the amount of data or whether IBNR is included.

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