Term Of The Day – Average Value Method
Average Value Method has a requirement for estimates of loss reserves that are made on an aggregate basis for a group or even a category of claims. Typically, this method is used to set a temporary average value. An individual case estimate can be made when more detailed information is received.
A group of Workers Comp claims valued with this method would have this info on the worksheet.
Estimated Average Value of Claims = Total Incurred / Number of Claims
I recommend splitting the Lost Time from the medical only claims. Medical only claims tend to skew the lost time figures and visa-versa.
Estimated Average Value of Lost Time Claims = Lost Time Total Incurred / Number of Lost Time Claims
Estimated Average Value of Medical Only Claims = Medical Only Total Incurred / Number of Medical Only Claims
The average value of Medical Only claims avoids claims festering. If the Average Value is higher than expected for medical only claim, further investigation is warranted to avoid a large claim out of the blue.
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