A worker may be injured today and not file a claim for weeks. Incurred but not reported claims, commonly called IBNR, are those that have already happened but have not yet been recorded in the insurer’s claims system. They represent a hidden liability that must be estimated.

Reporting lag varies by line of business and by claim type. Medical-only workers’ compensation claims may report quickly; latent injury or professional liability claims may take years. Actuaries study historical reporting patterns to project the ultimate number and cost of IBNR claims.

IBNR is a major reason that calendar-year loss ratios can differ from accident-year results. Adequate provision for IBNR is a core test of an insurer’s reserving strength. Sudden changes in claims practices or external events can disrupt historical patterns and require revised estimates.

• Claims that have occurred but not yet been reported
• Represent unrecorded liability
• Estimated from historical reporting lags
• Material in long-tail insurance lines