Incurred but not enough reported

A book of claims carries two shortfalls of different nature. The first concerns claims incurred but not yet reported, and it is the IBNR reserve that covers it. The second concerns claims perfectly well known, open and reserved, whose current valuation is structurally too low: that is what the IBNER reserve addresses, correcting the tendency of files to cost more as they age. The distinction is not academic, since the two shortfalls have different patterns and causes: the first unwinds fast, as soon as notice arrives, while the second spreads over the whole life of the file and feeds on medical inflation, case law and the timing of medical consolidation. In bodily injury lines, IBNER is commonly the heavier part of the actuarial uplift, because a severe trauma reveals its cost only once the harm is definitively assessed. The problem solved is reserving for what is already known but badly quantified, without waiting for the handler to notice.

On a severe head injury in a motor claim, medical consolidation commonly takes three to five years, and the Dintilhac schedule published in July 2005 requires some twenty separate heads of damage to be assessed, including third party care, which is capitalized over life expectancy. The reserve opened in the first year is therefore, almost by construction, far below the eventual cost.

insuffisance des provisions dossier, développement des sinistres connus, Incurred But Not Enough Reported, aggravation des dossiers connus, développement des sinistres déclarés, case reserve development