Using Benchmarks with Credible Data
Benchmarks can also be used to compare a company’s performance against the market. Again, there are two chief ways in which this may be done:
Claim Development
A company may wish to test its ability to settle claims versus the marketplace. This may be tested by examining its payment pattern versus a benchmark payment pattern
A company may also wish to test its ability to receive reports and accurately set case estimates as compared with the general market. This may be tested by examining its incurred development pattern versus a benchmark incurred development pattern.
Loss Ratios
A company may wish to test its overall performance versus the marketplace. This may be achieved by comparing loss ratios. However, case must be taken to ensure that like is being compared with like, as different regions and classes make a large difference, as do deductibles, limits and wordings.
Reinsurance usage may also be tested in this way, by examining reinsurance loss ratios instead of gross loss ratios.
Benchmarking - Introduction
Using Benchmarks with Sparse Data
