Calculation of The Chain Ladder and Bornhoutter-Ferguson Methods in Calculating Claim Reserves for Insurance of Property Company in Sumatra

Dila Tirta  Julianty; Tiara Yulita; Inaya Sathrani Aprilia

doi:10.35472/jsat.v9i1.2041

Dila Tirta Julianty Program Studi Sains Aktuaria, Fakultas Sains, Institut Teknologi Sumatera, Lampung Selatan
Tiara Yulita Program Studi Sains Aktuaria, Fakultas Sains, Institut Teknologi Sumatera, Lampung Selatan
Inaya Sathrani Aprilia Program Studi Sains Aktuaria, Fakultas Sains, Institut Teknologi Sumatera, Lampung Selatan

DOI: https://doi.org/10.35472/jsat.v9i1.2041

Keywords: Bornhuetter-Ferguson, Chain Ladder, Claim reserves, Property insurance

Abstract

Property insurance provides financial protection against the risk of loss due to damage or loss of insured property, such as buildings, vehicles, and equipment. Property insurance companies are required to maintain sufficient reserves to meet future claim obligations. Therefore, these companies need to accurately estimate claim reserves. This study aims to compare two methods of estimating property insurance claim reserves Chain Ladder method and Bornhuetter-Ferguson method. The data used in this research is secondary data obtained from property insurance in Sumatra, covering production and claims data from 2018 to 2023. The Chain Ladder method is a straightforward approach that uses historical claims development patterns to project future claims. The Bornhuetter-Ferguson method combines information from paid claims and estimates of the loss ratio from earned premium to predict reserves. Both methods are compared to assess their accuracy in estimating claim reserves using the Mean Absolute Percentage Error (MAPE). The results of this study indicate that the Bornhuetter-Ferguson method provides better estimates of claim reserves compared to the Chain Ladder method.

Downloads

Download data is not yet available.

References

T. Yulita, C. T. Lubis, and A. S. E. Hidayat, “Penentuan Premi Murni Di Kabupaten Kepahiang Provinsi Bengkulu Dengan Memperhitungkan Peluang Kejadian Gempa Bumi Dan Rasio Kerusakan Bangunan”, VARIANCE: Journal of Statistics and Its Applications, vol. 5, no. 2, pp. 147–158, Okt. 2023, doi: https://doi.org/10.30598/variancevol5iss2page147-158

A. M. Pratiwi and A. K. Mutaqin, "Penerapan Algoritma Naïve Bayes Classifier dalam Memprediksi Status Keberlanjutan Polis Nasabah Asuransi PT.X," Jurnal Riset Statistika, vol. 1, no. 2, pp. 117-126, Dec. 2021, doi: 10.29313/jrs.v1i2.435.

H. Intisari, P. Teori, and K. U. H. Dagang, “Metode konvolusi pada asuransi properti,” vol. 03, no. 1, pp. 33–36, 2015.

A. B. F. Abdul Majid, E. Puspita, and F. Agustina, “Penggunaan Metode Bornhuetter-Ferguson pada Peramalan Besar Cadangan Klaim Asuransi,” Eureka Matika, vol. 6, no. 1, 2018.

T. Yulita and A. R. Effendie, “Estimation Of Ibnr And Rbns Reserves Using RDC Method and Gamma Generalized Linear Model,” Media Statistika, vol. 15, no. 1, pp. 24–35, Jul. 2022, doi: 10.14710/medstat.15.1.24-35.

T. Mack, “Distribution-free Calculation of the Standard Error of Chain Ladder Reserve Estimates,” ASTIN Bulletin, vol. 23, no. 2, pp. 213-225, 1993.

R. L. Brown and W. S. Lennox, Introduction to Ratemaking and Loss Reserving for Property and Casualty Insurance, 4th ed. ACTEX Publications, Inc., 2015.

R. Amini and Y. Hikmah, “Estimasi Cadangan Klaim IBNR Menggunakan Metode Chain-Ladder dan Bornhuetter-Ferguson pada Produk Indemnity di PT. XYZ,” MAp (Mathematics and Applications) Journal, vol. 4, no. 1, pp. 50–59, 2022.

A. K. Mutaqin, D. R. Tampubolon, and S. Darwis, “Run-Off Triangle Data dan Permasalahannya,” Statistika, vol. 8, no. 1, pp. 55–59, May 2008.

M. Olofsson, “Stochastic Loss Reserving Testing the new guidelines from the Australian Prudential Regulation Authority (APRA) on Swedish portfolio data using a Bootstrap simulation and the distribution-free method by Thomas Mack,” Sweden, May 2006. [Online]. Available: http://www.math.su.se/matstat

J. Friedland and K. Llp, Estimating Unpaid Claims Using Basic Techniques Casualty Actuarial Society, 3rd ed. Casualty Actuarial Society, 2010.

J. A. Liliani, “Mengestimasi Cadangan Klaim pada Asuransi Kerugian Fire Insurance dengan Metode Bornhuetter-Ferguson”, Universitas Indonesia, 2021.

L. Noviyanti and S. Sudartianto, “Prediksi Cadangan Klaim Menggunakan Metode Bornhuetter-Ferguson,” in E-Prosiding Seminar Nasional Statistika| Departemen Statistika FMIPA Universitas Padjadjaran, 2018, pp. 1–9.

T. A. Mulyaningrum, “Estimasi Cadangan Klaim Menggunakan Metode Bornhuetter-Ferguson (Studi Kasus: Data Workers Compensation Periode 2010-2019),” UIN Syarif Hidayatullah, Jakarta, 2021.

P. England, R. Verrall, P. D. England, R. J. Verrall, P. England1, and R. Verrall2, “Standard Errors Of Prediction In Claims Reserving: A Comparison of Methods Workshop Standard Errors Of Prediction In Claims Reserving: A Comparison of Methods Analytic and bootstrap estimates of prediction errors in claims reserving,” Scotland, 1998.