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ASET Sept-07 Q3(v)(b)

O

obri600

Member
The ASET solution calculates paid claims by using the reciprocal of the mean term of paid claims (ie 25%) to estimate the proportion of ultimate claim amount paid to date.

Can anyone explain the rationale behind this?
 
Nothing particularly complicated, I'm afraid.

It takes on average 4 years to pay your claims, so in one year you might expect a quarter of ultimate claims to be paid.

Any reasonable assumption hopefully will have scored.
 
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