Payout Profile

A schedule illustrating the typical rate of dollars paid out in claim settlements over time. For example, on average, less than 30 cents of the total loss dollar for workers compensation claims is paid during the first year of coverage. Even less is paid on average for general liability claims. Depending upon the particular type of risk, an additional 5 to 10 years can elapse before the full 100 percent of the loss reserve is paid out on a particular claim. During this long pay-out period, the loss reserves (i.e., the not-yet-paid-out funds which are set aside by the insurer to cover the loss claims) can be a source of significant investment income to the insurer, and the payout profile is instrumental in estimating this source of profit for any given category of risk.