Claim Reserve Estimation Using Double Chain Ladder Method

One of the problems by insurance companies, especially for the business class with a long tail, is the length of the claim settlement period until the claim is paid off because there are procedures that must be carried out, such as analyzing and justifying the claims submitted. The claims still in the process are divided into two: claims that were reported but have not been settled (RBNS) and claims that incurred but have not been reported (IBNR). One method that is often used in estimating claim reserves is the Chain Ladder Method. However, this method is only able to estimate the IBNR claim reserve. In 2012, Martinez-Miranda, Nielsen, and Verrall developed a method that can generate predictions of claim reserves for IBNR and RBNS separately, namely the Double Chain Ladder method. This study uses simulation data to determine the stages of calculating the estimated claim reserves using the Double Chain Ladder (DCL) method. The calculation results show that the Double Chain Ladder (DCL) method can estimate IBNR and RBNS claim reserves clearly and separately with a total estimated RBNS claim reserve of 101,492,792 (in a million rupiahs), and the estimated IBNR claim reserve is 29,172,880 (in a million rupiah).