[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Short Tail Insurance**
## Definition
==Short Tail Insurance== refers to lines of business where claims are quickly reported and settled, typically within a year or less of the loss occurrence.
## Characteristics
### Rapid Development
- Claims reported soon after occurrence
- Quick settlement
- Low IBNR as percentage of ultimate
- Low reserve uncertainty
### Typical Lines
- **Auto Physical Damage** - Accidents reported immediately
- **Homeowners Property** - Damage obvious and reported quickly
- **Commercial Property** - Fast claim reporting
- **Personal Property** - Quick settlement
## Implications
### Reserving
- Small IBNR reserves
- Short development periods (12-24 months)
- Minimal tail factors (1.000-1.010)
- Lower reserve uncertainty
### Ratemaking
- Faster feedback on rate adequacy
- Shorter experience periods acceptable
- Less trending needed
- Quick adjustment to market changes
## Example Development
```
Auto Physical Damage Claim:
Accident: Day 1
Report to insurer: Day 1
Inspection: Day 3
Estimate approved: Day 5
Repair completed: Day 10
Payment issued: Day 15
Claim closed: Day 20
Total development: Under 1 month
```
## Comparison to Long Tail
| Aspect | Short Tail | Long Tail |
|--------|-----------|-----------|
| Report lag | Days/weeks | Months/years |
| Settlement | Weeks/months | Years |
| IBNR % | 5-15% | 40-80% |
| Development period | 12-24 months | 5-10+ years |
| Tail factor | 1.000-1.010 | 1.030-1.200 |
## Related Concepts
- [[Long Tail Insurance#Definition]]
- [[IBNR Reserves#Definition]]
- [[Development Factor#Definition]]
## References
- Friedland, Chapter 1