Accident Year Development, Bonus Banks, and Insurance Incentive Compensation

13 Pages Posted: 14 Feb 2007

See all articles by Joseph Calandro, Jr.

Joseph Calandro, Jr.

Fordham University - Gabelli Center for Global Security Analysis

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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 incentive compensation programs for insurance company executives and employees. This article will explain accident year analysis, and will 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.

Suggested Citation

Calandro, Jr., Joseph, Accident Year Development, Bonus Banks, and Insurance Incentive Compensation. Risk Management & Insurance Review, Vol. 9, No. 2, pp. 205-217, Fall 2006. Available at SSRN: https://ssrn.com/abstract=963030 or http://dx.doi.org/10.1111/j.1540-6296.2006.00094.x

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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