What Is Incurred But Not Reported
Incurred But Not Reported (IBNR)- An estimate of the amount of an insurer’s (or self-insurer’s) liability for claim-generating events that have taken place but have not yet been reported to the insurer or self-insurer. The sum of IBNR losses plus incurred losses provides an estimate of the insurer’s eventual liabilities for losses during a given period.
I am not a proponent of IBNR as the estimates for IBNR always seem to be somewhat inaccurate. This is especially true for first dollar Workers Comp policies.
An actuary calculates IBNR in most cases. No standard estimation calculation exists in the actuarial world. Actuaries use very differing methods for IBNR calculations.
Self-insureds should view IBNR very carefully. If the figure seems excessive, the employer should contact the actuarial firm or the individual actuary that created the estimate. IBENR (Incurred But Not Enough Reported) brings overly small reserves set by adjusters, The acronym IBENR means the adjuster had not reserved the file high enough.
I do not usually agree with IBENR as the reserving function by adjusters takes this situation into account. If one sees this term, they heavily review the calculation.
There can be a few instances where IBENR is applicable. A file that is going up through the claims department authority levels (Supervisor, Manager, and VP) may have a reserve recommendation. A file may be closed too early in some cases.
IBENR differs greatly from IBNR – Incurred But Not Reported.
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