What is meant by inconsistencies in the treatment of gross and net claims estimates? (In page 11 of the chapter) Below is the answer for 16.3 Actual claims development is slower than that suggested by the use of the basic chain ladder. (How is this known? ) If no adjustment is made to the basic chain ladder method, then the reserves calculated will be an underestimate of the amount required. If the reserves are also discounted, then the payments will be assumed to be made earlier than will eventually be the case, and will therefore be affected to a lesser extent by discounting. This will offset to some extent the inaccuracy in the basic chain ladder model. A revised model should take account of both of these factors. (Please explain)
