Application of claims reserving methods in medical insurance

Abstract

This research project aims to estimate outstanding claims and incurred but not reported (IBNR) reserves in medical insurance. The standard actuarial techinique; the chain ladder techinique is given a sound statistical foundation and considered as a linear model. The Inflation adjusted chain ladder method and completion factor method which are applications of the Basic chain ladder techinique are employed for purposes of estimating outstanding outsatnding claims and predicting the IBNR claims in medical insurance. It is due to the continued need for better health care that the insurance medical providers need to have a better reserving mechanism to counter any unanticipated claims that can lead them to insolvency. Actuarial judgement needs to be used, even with the application of statistical methods for the calculation of IBNR and estimation of outsatnding claims since the prediction for months with the most unpaid claims has most uncertainity. Therefore, the study looks for a detailed example of calculation of IBNR and estimation of outstanding claims to come up with a better advise as for the case in Kenya where medical bussinesses are booming but little care or consideration is given to reserving for tomorrow.