Developing an IBNR Model

[RANGERS684]

I'm in the procees of trying to develop an IBNR model and I was hoping you could provide me with some help. I am trying a couple different methods and getting some vastly different results.

In the first method, I am building completion factors by looking at the incurred/paid patterns of historical months which have already matured (i.e more than 12 months old) and averaging their collective first months' completion factors, second months' completion factors ... I then take these average completion factors and apply to my most recent months - so I divide the most recent month by the avg 1st month completion factors, divide the second most recent month by the average 2nd month's completion factors...in order build the incurred amounts for my recent months. The problem I have with this method is that I am essentially taking old completion factors, because in order for me to calculate the historical months' completion factor in my triangle it has to be mature or over 12 months old. The claims systems may have sped up in the last 12 months.

In the second method, I look at any incurred month which has at least 2 months of runout and I'm taking the cumulative paid claims through the 2nd month and dividing it by cumulative paid claims through 1 month. I did the same for 3rd month over 2nd month and so on. I then average the cumulative increases over one another for each month (2 over 1, 3 over 2..) over the last 12 months for which such experience is available and apply that to my most recent months experience to develop their cumulative incurrals. The problem with this method is that one month may have a 1.6 factor of 2nd month over 1st whereas another has a 3.7 factor. Then, I get very different results based on which months are included in my average factors.

The swings are much more sensitive to the cutoff point in the second method than in the first but the first uses old data to calc completions whereas the second uses recent development factors. Are either of these approaches the right method for calculating IBNR? How can I refine these methods to get a more consistent and current result?

Thanks for your help.