The information gives us paid claims in the calendar year. It has nothing to do with when the business is earned. Remember that the concept of earning risk is not relevant for funded accounts.
Your argument says that the "average claim will be paid on 31/12". But this means that some claims will be paid after 31/12. That's not in this calendar year. So those claims will form part of the £32.6m, not the £5.2m.
Look at it another way, if the average claim paid in the calendar year is paid on 31/12, then that must mean that no claims are paid at all for the first 364 days of the year! So we have to discard that idea.
Equally, we can't assume that the average claim is paid mid-way through the calendar year, because there are more policies in force in the second half of the year than there are in the first half of the year.
So, let's choose half way between those two options, ie 9 months through the year. This is a little cavalier of course. Ideally we would have a payment profile to help us. But it's the best we can do with the information available.
Good luck!
Katherine.
Last edited: Sep 19, 2012
