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Foundations of Casualty Actuarial Science

without incurred effect for the file. A payment may have
no incurred effect if the remaining reserve is reduced
by the amount of the payment.

So, if the claim adjuster reduces the case reserve by the
amount of payments, there is no incurred loss effect.

Often, automated claim systems reduce the case reserve
by the reserve action only if the intent is to change the
total valuation of the claim file.

One of the most important statistics to monitor for any
claim inventory is the number of closings. Some claims
are closed with some payments of loss/expense whereas
some claims are closed without payments.

Often a change in the closing rate can lead the analyst
to discover an important operational change in claims
administration. The incurred effect of reserve closings
can be calculated from the same formula :

Incurred Loss = Paid Loss - Beginning Reserve

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