Bornhuetter-Ferguson Technique
Categories: Insurance
Far be it for us to pry into your personal life. If this is something you're into, hey, we're not going to judge. Just be safe.
Of course, we're talking about an actuarial technique used for insurance claims. The process, created by the so-called "Two Rons," Ron Bornhuetter and Ron Ferguson, was launched in the 1970s as a way of setting aside funds related to claim-related losses at insurance companies.
Okay, so...you run an insurance company. You've got claims that you've paid out, but you haven't reported them yet, because you're still in the middle of your fiscal year. The goal is to take the losses you've already incurred and use them to estimate the total loss you'll eventually have to report.
There's a bunch of math and stuff involved that you'd have to be an actuary to care too much about. But bottom line: it uses recent claim data to help insurance companies plan.
