01 / The meaning
What it means.
For a particular claim, the estimate can change as evidence, repair costs, medical information or legal assessments develop. At portfolio level, insurers also estimate liabilities for losses that have happened but have not yet been reported. These estimates support financial reporting and prudential management. They are not necessarily separate bank accounts containing cash earmarked for each policyholder.
A reserve is neither a settlement offer nor a decision that the claim is covered. It can include expected claim-handling or defence expenses, depending on the report’s basis. A business reviewing its claims history should distinguish paid amounts from outstanding estimates and ask whether the figures are gross or net of recoveries. Open claims information can influence underwriting discussions, making accurate descriptions and current status valuable at renewal.
02 / Put it in context
A practical example.
Hypothetical example: a contractor’s claims report shows $8,000 paid and a $40,000 outstanding reserve. It asks what remains unresolved and whether defence expenses are included, rather than telling the claimant that a $48,000 settlement has been approved.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Check whether the report shows paid, outstanding and total incurred amounts separately.
- Ask when open reserves were reviewed and what information could change them.
- Establish whether expenses, excesses and recoveries are included in the figures.
04 / Start a useful conversation
A question for your broker.
Does this claims-history figure describe money already paid, a current estimate, or a proposed settlement?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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