Solution says we should examine the triangle of average outstanding claims:total claims outstanding(incurred minus paid). Im confused at how to algebraically compute this since paid amounts are higher than reported\incurred amounts. Does this mean developing both the amount and count triangles of PAID claims,then taking the totals of each year,less what is paid and dividing by number claims we expect to be paid in future? Tutors kindly assist.Thanks
The question does not say that the paid amounts are greater than the incurred amounts, it says that the estimates from your paid projections are greater than your estimates from your incurred projections. In any case the examiners tell you how to calculate the triangle of average outstanding claims. You divide the triangle of outstanding claim amounts (calculated as the difference between the cumulative incurred and cumulative paid triangles) by the triangle of the number of claims outstanding (calculated as the difference between the triangle of cumulative reported claim numbers and the triangle of cumulative settled claim numbers).
