Which term describes the process of forecasting future claims by applying historical data?

• A. Loss Projection
• B. Likelihood
• C. Loss Development
• D. Limit of Liability Clause

Answer: (A)

This question tests forecasting future claims by using historical data. That approach is called loss projection. Actuaries take past claims experience—counts, severities, and patterns over time—and apply trend adjustments (like inflation, rate changes, and shifts in exposure) to estimate the expected total claims for a future period. This helps set premiums, allocate reserves, and plan resources. Loss development, by contrast, deals with how losses evolve as more information becomes available about already reported claims, not with projecting future losses from historical data. Likelihood refers to the probability of an event, and a limit of liability clause is a contract term that caps coverage. So the best term for forecasting future claims using historical data is loss projection.