What is a Loss Triangle?
A loss triangle is a way to analyze and predict losses over a given period, typically by tracking the frequency and severity of claims. Loss triangles are used during a company's critical financial decisions, such as workers' compensation, property insurance, and liability insurance claims, to show the loss development for a specific risk.
The loss triangle takes the form of a triangle, with one side representing periods (such as years) and the other two representing the cumulative number of claims and the cumulative amount of losses, respectively. This approach to loss evaluation provides predictive analysis and supports more effective claims and portfolio management.
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