Prediction of Claim Fund Reserves in Insurance Companies Using the ARIMA Method

Authors

  • Goenawan Brotosaputro ISB Atma Luhur Pangkalpinang
  • Yohanes Setiawan Japriadi
  • Wiwin Windihastuty
  • Rivai Ahsani

Abstract

Insurance is a financial protection contract between a customer and an insurance company which is stated in the form of an insurance policy. Prediction of insurance claim reserve funds is necessary because the claim amount varies and the claim time can be the same. If at any time there is a claim that is so large that it exceeds the available claim reserve fund plus the claim occurs at the same time, it can cause the company to fail to pay the claim. This will certainly make the company's conduct decline, customer trust will be lost, and can cause the company to go bankrupt. The problem can be solved if the insurance company has sufficient claim fund reserves. Claim fund reserves are an important issue in insurance companies. This study aims to predict the claim fund reserves in insurance companies to anticipate varying claim amounts. Historical analysis of the value of claims with the ARIMA model approach is used to predict future claim values. We use claim value data that has been scaled in millions. 2020 to 2022 as training data and 2023 as test data. The Root Mean Square Error (RMSE) metric obtained is IDR 25,780.71; Mean Absolute Deviation (MAD) of IDR 14,421.89, and Mean Absolute Percentage Error (MAPE) of IDR 5,967.27; while the total actual claim value in 2023 is IDR 161,700.51 and the total predicted claim value is IDR 166,227.36; which means that an accuracy of 97% is obtained. The result of claim prediction value in one periodic year can give a favor to the management to make a decision, how much the claim funds should be prepared.

Published

2025-01-03

Issue

Vol. 14 No. 1 (2025): JANUARY (In Press)

Section

Articles

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