Incurred But Not Reported (IBNR) refers to insurance claims that have already happened but haven’t been reported to the insurer yet.
Understanding Incurred But Not Reported (IBNR) in Plain English
Incurred But Not Reported, often shortened to IBNR, is an important insurance concept that sounds complicated but is actually quite logical once you break it down.
IBNR describes claims that have already occurred, meaning the accident, injury, or loss has already happened — but the insurance company hasn’t been notified yet. Since insurers know that not all claims are reported immediately, they must estimate these future claims and set aside money for them.
In simple terms, IBNR is about preparing for claims that are coming… even though no one has filed them yet.
Why Do IBNR Claims Exist?
People don’t always report insurance claims right away. There are many reasons for this:
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Someone might not realize they’re insured
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A person may delay medical treatment
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Paperwork takes time
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A claim is reported to an agent but not yet entered into the system
For example, imagine a worker gets injured at work today but doesn’t file a workers’ compensation claim until next month. The injury already happened, but the insurer doesn’t know about it yet. That future claim falls under Incurred But Not Reported (IBNR).
How Insurance Companies Handle IBNR
Because insurers know that IBNR claims exist, they don’t just wait and hope for the best. Instead, they create IBNR reserves — estimated amounts of money set aside to pay these unknown claims when they eventually show up.
Actuaries use historical data, trends, and experience to estimate how many claims are likely to be reported later and how much they might cost. These estimates help insurers stay financially stable and avoid surprises.
Without IBNR reserves, an insurance company could suddenly face large unexpected payouts that hurt its finances.
Pure IBNR vs. Other Related Estimates
When people talk about Pure IBNR, they usually mean claims that:
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Have already occurred
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Have not been reported at all
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Are completely unknown to the insurer at the reporting date
But IBNR can also include a few related situations.
Claims Reported but Not Yet Recorded
Sometimes a claim has technically been reported, but it hasn’t yet been entered into the insurer’s claims system. These claims may still be included in IBNR estimates until they are fully recorded and reviewed.
Bulk Provisions and Case Reserve Gaps
IBNR may also include bulk provisions, which are additional reserves added on top of known claims. These are used when insurers believe the existing case reserves aren’t high enough to cover the full cost of reported claims.
This leads to another related term: Incurred But Not Enough Reported (IBNER). IBNER refers to claims that have been reported, but the estimated cost is too low and will likely increase over time.
In practice, insurers often group Pure IBNR, bulk provisions, and IBNER together under the broader IBNR umbrella.
Real-Life Example of IBNR
Let’s say an auto insurance company closes its books at the end of March. A car accident happens on March 28, but the driver doesn’t report it until April 10.
Even though the claim hasn’t been filed by March 31, the accident still happened in March. The insurer must include an IBNR estimate for that claim in its March financial statements.
Multiply that situation by thousands of policyholders, and you can see why IBNR is such a big deal.
Why IBNR Matters to Policyholders and Businesses
For everyday policyholders, IBNR works behind the scenes to make sure insurers can pay claims when they’re filed. You may never see the term on your policy, but it plays a major role in keeping insurers financially healthy.
For businesses, regulators, and investors, IBNR is critical for accurate financial reporting. It ensures insurance companies aren’t underestimating their liabilities or overstating profits.
The Bottom Line on Incurred But Not Reported (IBNR)
Incurred But Not Reported (IBNR) is all about anticipating claims that haven’t shown up yet. By estimating and reserving for these claims, insurers protect themselves — and their customers — from financial surprises.
While it’s a technical term, the idea is simple: just because a claim hasn’t been reported doesn’t mean it doesn’t exist.
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