Case Development Method Assumption

[2M]

Key Assumption

Claims activitity related to IBNR is related in a consistent manner to claims already reported.


This assumption does not hold true for many P&C lines


why?

[Kongo]

Ever heard of "Pure IBNR"?

[Vorian Atreides]

I think the fact that link ratios for any given age of development are not consistent for all AY leads to the statement that IBNR isn't consistently related to known claims (either paid or reported) for each AY.

Put another way, knowing your paids and case outstanding doesn't say much about what IBNR you can expect to emerge (even on average) in the next development period(s).

[Adversely Selected]

Originally Posted by 2M

Key Assumption

Claims activitity related to IBNR is related in a consistent manner to claims already reported.


This assumption does not hold true for many P&C lines


why?

Most methods we are estimated the broad definition of IBNR (IBNER and IBNYR or pure IBNR), which that assumption may hold true for IBNER assuming history has not changed much. For the case O/S method, you are only estimated pure IBNR, which is the most difficult piece to estimate since nothing is known about it and claims reported to date will say little to nothing about the unknown.

When estimated development on IBNER, at east we know something about the claim and hope our claims adjusters are somewhat competent or at least consistent in setting case O/S.