Average indemnity divides total indemnity paid by the number of claims closed with payment, within a segment defined by claim type, venue, or severity. It excludes defense expense.
Median figures are frequently more informative than means.
Alternative Names:
Average Payment, Mean Indemnity
Why it Matters?
Means are distorted by severity outliers in liability lines, where a small number of large verdicts pulls the average well above the typical claim. Reporting the median alongside the mean, and reviewing the distribution rather than either figure alone, gives a more useful picture. Segmentation matters equally, since an average across all claim types describes nothing specific enough to guide a reserve.
Frequently Confused with
Related terms
Frequently asked questions
Why is the median more informative than the mean?
What segmentation is needed?
