Which term is used in Part 5, Section 2 as the denominator in average case outstanding severity?

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Multiple Choice

Which term is used in Part 5, Section 2 as the denominator in average case outstanding severity?

Average case outstanding severity is a per-claim measure: you want the total outstanding amount divided by the number of claims that are still active. That means the denominator must count how many claims are open, including both direct business and assumed (reinsurance) streams. Using direct & assumed open counts gives you the correct per-open-claim basis, ensuring the severity isn’t biased by counting claims that aren’t currently outstanding or by using a monetary total as a divisor. Using reported counts wouldn’t capture all currently open claims if some claims remain unresolved or move between statuses, and ultimate claim counts represent total claims over the life of the account, not the current open pool. Unpaid claims is a monetary total, not a count, so it wouldn’t form a proper per-claim denominator.

Average case outstanding severity is a per-claim measure: you want the total outstanding amount divided by the number of claims that are still active. That means the denominator must count how many claims are open, including both direct business and assumed (reinsurance) streams. Using direct & assumed open counts gives you the correct per-open-claim basis, ensuring the severity isn’t biased by counting claims that aren’t currently outstanding or by using a monetary total as a divisor.

Using reported counts wouldn’t capture all currently open claims if some claims remain unresolved or move between statuses, and ultimate claim counts represent total claims over the life of the account, not the current open pool. Unpaid claims is a monetary total, not a count, so it wouldn’t form a proper per-claim denominator.

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