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Foundations of Casualty Actuarial Science

Q9. Write short notes on -

a) Average Paid Claim Projection - A history of average
claim amounts can be obtained by dividing the paid
amounts by the number of claims closed with payments.
These average paid amounts will represent both average
closing payment, plus any amounts paid on claims before
closure.

In some lines, such as workers' compensation,
these interim payments can be substantial. In those
cases, this technique may not be as useful as for
lines that close with a single payment. The triangular
format can be then conveniently used to inspect
the addition of more development points in the
averages.

The analyst then chooses the appropriate development
pattern. Then based on those chosen factors, the
complete projection of average paid loss by accident
year may be completed. The review of annual increases
in the ultimate average paid amount yields an average
of payments per closed claim.

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