Incurred but not reported claims reserves estimates methods for auto insurance

Abstract

Due to unprecedented increase in motor insurance coverage, insurance companies are more focus on their financial reporting and general actuaries desire to incorporate more statistical concepts into their daily responsibilities, such as reserve estimates. Recognizing this increased financial oversight, this paper considers develop a model to estimates the Incurred But Not Reported Claims Reserves (IBNR) for Sri Lankan Auto Insurance Market, specifically geared for the work of general actuaries in auto insurance industry. Development factor method also known as completion factor method with the chain ladder approach used to derive the IBNR estimate as a deterministic approach and the regression approach used to develop a model to estimate IBNR for the most recent months. However, combining framework for both methods is important on the same problem. Using the both deterministic and statistical methods, identify the linear and log linear regression models to estimate the IBNR claims for the recent months and then the total estimates throughout the time period after comparing the estimated values with the values obtained from the completion factor method. The developed models will geared for the work of general actuaries in auto insurance in Sri Lankan insurance industry and this will serves to stimulate further research and development of innovative techniques for accurate IBNR predictions.