Term Of The Day – Average Value Method
The Average Value Method requires 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 vice 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 a medical-only claim, further investigation is warranted to avoid a large claim out of the blue.
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