Claim Frequency

Claim frequency measures how often claims occur relative to the amount of exposure being insured. It works by dividing the count of claims by the total exposure, so you get an average claim rate per policy-year (or whatever exposure unit is being used). This makes it easier to compare portfolios of different sizes or time periods on a like-for-like basis.

Use this when analysing insurance experience, pricing premiums, or comparing risk across groups with different amounts of exposure. It is especially useful in actuarial work for estimating how often claims are expected to happen in the future.

• Using the number of policies instead of exposure time when policies have different durations
• Confusing claim frequency with claim severity, which measures the average cost per claim
• Forgetting to keep the exposure unit consistent, such as mixing policy-months and policy-years