What is the purpose of factor reserving used by motor insurers for small own motor damage claims?

Factor reserving is a method utilized by motor insurers to establish reserves for small own motor damage claims based on actuarially derived average amounts. This approach provides a consistent and efficient way to manage reserves for a high volume of similar claims, ensuring that the reserve amount reflects typical loss experiences rather than requiring detailed analysis for each individual claim.

By applying an average amount, insurers can streamline their processes and save time, as well as simplify their financial planning and reporting. This method also helps maintain a stable reserve level across multiple claims, making it easier for insurers to allocate funds appropriately without needing to evaluate each claim on its own merits continuously. The focus is on recognizing common patterns in claim costs that can be effectively predicted based on historical data, making it a practical choice for managing smaller claims efficiently.

While other options might suggest personalized assessments or adjustments based on specific market trends, factor reserving distinctly emphasizes a standard approach for similar claims, which is why it aligns primarily with reserving a uniform amount based on actuarial data.