BIMB Integrated Annual Report 2017

46. TAKAFUL RISK MANAGEMENT (CONTINUED) (b) General Takaful Fund (continued) Sensitivities (continued) – Average claim settlement period Reserves are based on the assumption that claim settlement period is expected to be stable over the years. A change in claim handling practice will have an impact on claim cost and future liabilities. The summary of changes in key assumptions and the impact to the gross and net claim liabilities, and the operating surplus, are shown below: GROUP IMPACT ON IMPACT ON IMPACT ON CHANGE IN GROSS NET UNALLOCATED ASSUMPTIONS LIABILITIES LIABILITIES SURPLUS RM’000 RM’000 RM’000 2017 Fire loss ratio for AY 2017 +10% 19,630 8,534 (8,534) Motor Act loss ratio for AY 2017 +10% 2,964 2,100 (2,100) Average unpaid claims +10% 41,354 18,011 (18,011) Average claim frequency +10% 13,875 7,656 (7,656) Average claim settlement period Increase by 6 months 43,225 41,420 (41,420) 2016 Fire loss ratio for AY 2016 +10% 15,301 4,826 (4,826) Motor Act loss ratio for AY 2016 +10% 3,424 2,550 (2,550) Average unpaid claims +10% 35,015 14,921 (14,921) Average claim frequency +10% 11,632 6,268 (6,268) Average claim settlement period Increase by 6 months 33,986 22,601 (22,601) Claims development table The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at the end of reporting period, together with cumulative payments to-date. In setting provisions for claims, Takaful Malaysia Group gives consideration to the probability and magnitude of future experience being more adverse than assumed and exercises a degree of caution in setting aside reserves when there is considerable uncertainty. In general, the uncertainty associated with the ultimate claims experience in an accident year is greatest when the accident year is at an early stage of development and the margin necessary to provide the necessary confidence in adequacy of provision is relatively at its highest. As claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 283 Overview Value Creation Accountability Financial Statements Sustainability Performance Data Shareholders Information 21 st AGM Information Management Discussion & Analysis t t