Average claim cost
Another word for severity: total cost divided by claim count. It is the key indicator for tracking claims inflation.
Average cost of 2,800 EUR in 2022, 3,100 EUR in 2023, frequency unchanged: a 10.7% rise in one year. Average claim cost is total incurred losses divided by the matching claim count. It is the severity measure used in operational monitoring. Tracked over time, it is the claims inflation indicator. When it rises while frequency stays put, unit costs are drifting, whether materials, labor or social inflation. It is broken down by claim category, accident year and geography. It reacts sharply to large losses and to shifts in portfolio mix. Settled average cost, computed on closed claims, is kept apart from estimated average cost, which includes reserves on open files.
Average cost was 2,800 EUR in 2022 and 3,100 EUR in 2023. That is a 10.7% rise in one year with no increase in frequency, a materials inflation signal to build into the pricing review.
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