Abstract:
Within the insurance industry, the calculation of reserves for predicting
fund allocation becomes highly prominent, as companies must do it accurately to
settle future claims. Consequently, insurance firms enhance financial security,
ensuring sufficient resources are available to meet obligations, particularly during
periods of increased claims activity. This research discusses the calculation of
claim reserve estimates using Chain Ladder (CL) method and the Generalized
Linear Model (GLM) with Over-Dispersed Poisson (ODP) distribution.
Leveraging the simplicity of the CL for baseline projections and the flexibility of
GLMs for refining estimates based on additional predictors. Both models yield
estimation results for the run-off triangle, illustrating the expected development of
claims over a specific period. The case study used in this research involves Auto
data from 2010 to 2019 at Zurich Insurance Company in the North America
region. The results of calculations using the CL method and GLM with the ODP
approach give the same results. Estimates using the ODP approach provide a
confidence interval between USD 1,479,610 and USD 1,480,253. The prediction
error with MAPE results is the same for both CL and GLM method which is
42,81%. Based on these results, it can be concluded that insurance companies can
use the GLM method as a method that provides confidence intervals for making
insurance decisions in providing claims reserves.
