Having collected and studied insurance company data, the actuary can estimate the value of reserves required to pay all claims for the period under study with the following process.

Process for Establishing the Value of Reserves

1. Compile information recorded in claim system through the valuation date (green)
2. Adjust data view to correct for historical inconsistencies by studying settlement and reporting patterns and company reserving practices (yellow)
3. Using a number of reserving methods, determine the correct total reserves required to pay unsettled reported claims (IBNE) and unreported claims which have already occurrred (IBNR) (red)

Since data that Chris compiled for his study was the case reserves that I established, I found that as a claims examiner, I could make his job as an actuary easier by:

1. Consistently establishing case reserves in accordance with company policy.
2. Adjusting the case reserve on a claim to reflect payments as they are made and make sure the reserve is "0" when the final payment is made.

My contribution to his efforts is important because ultimately reserve estimates that Chris establishes reflect on the company's surplus (net worth).

Copyright © 1996, 1997 Maher Associates, Inc.
Last modified: January 1, 1997