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The ABCs Of IBNR
So what are 'incurred but not rep...ARY The key to a credible analysis of IBNR is to gather as much data as possib...

... bonuses under an addendum. Some companies offer as many as five or six of these additional bonuses. But to return to the contingency contracts themselves, agents often negotiate how loss reserves, “take-downs” (reductions in loss reserves), and IBNRs affect contingency bonuses. Loss Reserves. Assume that you have a one-year contingency contract without any kind of averaging or carry-forward provisions. If one of your clients has incurred a large loss for which the principals believe the insurance company has significantly under-reserved, and the agency's ... ratio is already too high to receive a contingency bonus for the year, you should negotiate with the insurance company to set its loss reserve as high as possible for that year. Because you're not going to make a bonus for the year, you have nothing to lose. If, on the other hand, the company waits until the following year or beyond to increase the loss reserve to an appropriate level, your loss ratios — and contingencies —will suffer for an extended period. Take-downs. Many companies ... money in the long run by placing business with my company than with our competitor, despite its higher commissions. A number of years ago, I created my own consulting company to help independent agents analyze their contingency contracts. Analyzing contracts isn't necessarily a difficult task, but it's time-consuming and requires knowledge of the contracts available. When agencies hire me to perform reviews, I ask for copies of their contingency contracts, and their contingency statements and production documents from the past three years. From these, I can determine the agency's volume ...