Accident Year Development, Bonus Banks and Insurance Incentive Compensation

15 Pages Posted: 2 Aug 2005

See all articles by Joseph Calandro, Jr.

Joseph Calandro, Jr.

Fordham University - Gabelli Center for Global Security Analysis

Multiple version iconThere are 2 versions of this paper

Date Written: January 4, 2006

Abstract

Insurance claims can take years to resolve, which makes insurance performance measurement - and incentive compensation based on such measurement - challenging. The insurance industry utilizes a method of analysis called accident year analysis to manage the temporal challenge inherent in insurance claims. Despite the managerial and economic utility of this method of analysis it has generally not been applied to insurance incentive compensation programs. We explain accident year analysis, and then show how it can be merged with the bonus bank concept and the Insurance Performance Measure, which is an insurance economic profit metric, to construct an economically consistent insurance incentive compensation program.

Keywords: insurance, incentive compensation, value based management

JEL Classification: G22, G30, M21

Suggested Citation

Calandro, Jr., Joseph, Accident Year Development, Bonus Banks and Insurance Incentive Compensation (January 4, 2006). Available at SSRN: https://ssrn.com/abstract=773244 or http://dx.doi.org/10.2139/ssrn.773244

Joseph Calandro, Jr. (Contact Author)

Fordham University - Gabelli Center for Global Security Analysis ( email )

531 Hughes Hall
441 E. Fordham Rd
Bronx, NY 10458
United States

HOME PAGE: http://www.linkedin.com/in/josephcalandro/

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