Pricing in General Insurance

274 Pricing in General Insurance

In Example 1 above, not all claims may be reported immediately and therefore in every

period, the number of claims will only be an estimate based, amongst other things, on our

estimates of incurred but not reported (IBNR) claims.

In Example 2, there are at least two sources of data uncertainty:

i. The loss amount for open claims will not be the nal settled amount, but a com-

bination of (possibly) an amount already paid and an estimated reserve for the

outstanding portion of the claim.

ii. For both open and closed claims because the severity model is built using the reval-

ued losses, any uncertainty on the correct ...