What is the definition of Incurred Losses?

Incurred Losses referred to the total amount of claims paid and loss reserves that are associated with a certain time frame, such as a policy year.

Incurred losses are computed by adding up any losses during the policy year and any outstanding losses at the end of that period, subtracted by the outstanding losses at the beginning of the year.

This is an important measurement tool for insurance companies in order for them to establish the right amount of reserves, as well as right computation for the premiums and loss ratios.

These are losses that may either be paid or not.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage