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IAI Actuarial Core Principles · Economic Modelling · Run-off triangles

For accident year 2022, incremental paid claims in development year 0 were Rs 6,00,000 from 300 claims settled in that year. Using the average cost per claim method on incremental data, the average cost per claim in development year 0 for that year is:

The average cost is Rs 2,000 per claim. It is found by dividing the incremental paid amount of Rs 6,00,000 by the 300 claims settled in that cell, which is the basic building block of the average cost per claim method.

  1. ARs 1,000
  2. BRs 1,500
  3. CRs 2,000Correct
  4. DRs 2,500
  5. Rs 3,000

Explanation

Average cost per claim = incremental paid amount divided by the number of claims in that cell = 6,00,000 / 300 = Rs 2,000. Rs 3,000 or Rs 1,500 would come from using wrong counts.

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