These are claims resulting from losses that have already taken place, but the claims incidents have not yet been reported to the insurance company at the time. This scenario becomes important when an insurer deals with an accounting period as the law requires insurance companies to put a reserve in place to cover such losses.

As an example, a car insurance company has their financial year end on the 31 December. Any car accidents that happened before this date, which will give rise to claims against the insurance cover, should be included in the accounting figures for the year end. The insurance company will therefore place an amount in a reserve fund for incurred but not reported claims (IBNR) at the end of December. The amount will be based on previous experience and statistics as provided by the insurance company’s actuaries. The term Incurred but not enough reported (IBNER) will refer to the inadequate reserving of past claims.

IBNER can also refer to claims that have already been reported but where the full extent of the claim is not yet known, such as motor car accidents where serious injuries were involved.

Incurred claims will represent the amount of claims that have been paid as well as the amount placed in reserve for claims still to be paid for the accounting period under question.