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Claims Data

Note Section 3.1 • Reading time: ~5 mins

Key Claims Concepts & Definitions

To measure and analyze losses accurately, actuaries must understand the foundational units and lifecycle of claims data.

  • Claim: A formal request by an insured or third-party claimant for payment under the terms of an insurance policy.
  • Claimant: A person or entity making a claim for indemnification. A single occurrence can involve multiple claimants.
  • Accident / Occurrence: An event that triggers liability or property coverage under the policy.

Loss Measurement Metrics

At any given evaluation date, losses are tracked using three primary metrics:

1. Paid Losses

  • Actual cash payments disbursed by the insurer to settle claims (or parts of claims).
  • Paid losses represent finalized transactions and do not contain estimates.

2. Case Outstanding (Case Reserves)

  • The estimated amount of money required to settle a specific, reported claim in the future, as determined by a claims adjuster.
  • Case reserves are subjective and are adjusted as more information about the claim becomes available.

3. Reported Losses (Case Incurred Losses)

  • The sum of cumulative paid losses and current case reserves as of a specific evaluation date: Reported Losses=Paid Losses+Case Reserves\text{Reported Losses} = \text{Paid Losses} + \text{Case Reserves}
  • Note: For a specific calendar period, the change in reported losses is calculated as: ΔReported Losses=Paid Losses during period+ΔCase Reserves during period\Delta\text{Reported Losses} = \text{Paid Losses during period} + \Delta\text{Case Reserves during period}

Aggregation of Claims Data

Like premium data, claims can be aggregated in multiple ways depending on the analytical objective:

Accident Year (AY)

  • Aggregates all losses arising from accidents occurring during a specific calendar year, regardless of when the policy was written or when the claim was reported.
  • Use Case: Standard for rating and loss development analysis in occurrence-based policies.

Policy Year (PY)

  • Aggregates all losses arising from policies written during a specific calendar year.
  • Use Case: Useful for matching premiums and losses directly to evaluate underwriting performance.

Report Year (RY)

  • Aggregates all losses based on the calendar year in which the claim was first reported to the insurer, regardless of when the accident occurred.
  • Use Case: Critical for analyzing claims-made policies (see Claims-Made Policies).