Friedland Chapter 9

STUDY
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Key assumption of the Bornhuetter-Ferguson method
Unreported (or unpaid) claims will develop based on expected claims. In other words, the claims reported to date contain no informational value as to the amount of claims yet-to-be reported.
Advantage of Bornhuetter-Ferguson method
Random fluctuations early in the life of an accident year (or other defined time interval) do not significantly distort the projections.
Benktander method
Credibility-weighted average of the Bornhuetter-Ferguson technique and the development technique.
Advantage of Benktander method
More responsive to changes in the underlying claim ratio than the Bornhuetter-Ferguson technique and the development technique.
Disadvantage of Benktander method
Less responsive to changes in case outstanding adequacy and changes in the product mix.
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