UNCERTAINTY OF THE ULTIMATE CLAIMS PREDICTION USING COMPLEMENTARY LOSS RATIO METHOD

• Main Author: WARDANY HARAHAP (NIM: 20814015), KASUMA
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/22767
• Institution: Institut Teknologi Bandung

A general insurance company needs to set up a reserve for the outstanding claims liability of a long tail business. An actuary of the company may determine the estimate of the outstanding claims liability using a runoff triangle of paid claims and/or incurred claims. Many methods can be used to predict the outstanding claims liability. One problem which may occur is that the prediction of ultimate claims using a runoff triangle of paid claims are significantly different from those obtained using a runoff triangle of incurred claims. This tesis discusses Complementary Loss Ratio (CLR) method which may be used to predict the ultimate claims. The CLR method uses the runoff triangles of paid claims and incurred claims simultaneously in predicting the ultimate claims. The prediction of the ultimate claims is carried out based on a long term view and a short term view (that is predicting the payment for the next one year). In addition, the CLR method is able to calculate the mean square error (MSE) of the ultimate claims predictors which are used to measure the uncertainties of the ultimate claims predictions.