[4][5][7][8] Like other loss reserving techniques, the Bornhuetter–Ferguson method aims to estimate incurred but not reported insurance claim amounts.
It is primarily used in the property and casualty[5][9] and health insurance[2] fields.
The estimated percent unreported (or unpaid) is established by observing historical claims experience.
Finally, expected losses multiplied by an estimated percent unreported are added (as in the first approach).
[2][5] The estimated percent reported is the reciprocal of the loss development factor.