9.	Losses and Loss Adjustment Expenses Incurred and Paid

The Company underwrites primarily a single product in the form of a non-standard personal automobile policy. Although this product can vary in terms of its coverages (liability and physical damage), disaggregation by these coverages is not considered meaningful due to the relative immateriality of the physical damage component which is only approximately 5% of the ending liability for unpaid losses and LAE. Additionally, the amount of renters coverage sold as an optional product is likewise immaterial. Information regarding the reserve for unpaid losses and loss adjustment expenses (“LAE”) is as follows (in thousands).

	Year Ended December 31,
	2017			2016			2015
Liability for unpaid losses and LAE at beginning of year, gross	$	161,079		$	122,071		$	96,613
Reinsurance balances receivable		(769	)		(464	)		(362	)
Liability for unpaid losses and LAE at beginning of year, net		160,310			121,607			96,251
Add: Provision for losses and LAE:
Current year		223,056			278,366			218,186
Prior year		(2,271	)		30,636			845
Net losses and LAE incurred		220,785			309,002			219,031
Less: Losses and LAE paid:
Current year		120,708			163,792			129,216
Prior year		102,097			106,507			64,459
Net losses and LAE paid		222,805			270,299			193,675
Liability for unpaid losses and LAE at end of year, net		158,290			160,310			121,607
Reinsurance balances receivable		840			769			464
Liability for unpaid losses and LAE at end of year, gross	$	159,130		$	161,079		$	122,071

The favorable change in the estimate of unpaid losses and loss adjustment expenses of $2.3 million for the year ended December 31, 2017 was the net result of favorable LAE development related to bodily injury claims over the 2014-2016 accident years, offset by unfavorable development on losses related to bodily injury severity over the 2014-2016 accident years.

The unfavorable change in the estimate of unpaid losses and loss adjustment expenses of $30.6 million for the year ended December 31, 2016 was the result of increased losses primarily from the 2015 accident year across all major coverages. The most significant causes of the development were a greater than usual emergence of reported claims and higher bodily injury severity.

The unfavorable change in the estimate of unpaid losses and loss adjustment expenses of $0.8 million for the year ended December 31, 2015 was largely the result of an increase in bodily injury loss adjustment expenses (primarily outside legal costs) driven by the overall increase in claim frequency.

The information about incurred and paid claims development for the 2008 to 2016 years, and the average annual percentage payout of incurred claims by age as of December 31, 2017, is presented as required supplementary information.

Incurred losses and loss adjustment expenses, net of reinsurance, by accident year are as follows (in thousands).

	For the years ended December 31,
Accident year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
2008		187,583		174,921		174,312		175,044		175,849		176,468		176,947		177,190		177,226	$	177,892
2009				146,584		140,539		140,501		141,936		142,819		142,772		142,546		142,705		142,703
2010						135,458		133,283		134,470		134,446		134,191		134,144		133,983		134,000
2011								126,384		126,886		126,272		126,373		125,810		125,670		125,703
2012										144,231		140,111		140,249		140,673		141,375		141,100
2013												145,878		140,775		142,053		144,076		144,450
2014														166,179		165,991		171,827		171,372
2015																218,186		240,419		240,388
2016																		278,366		275,768
2017																				223,056
Total																			$	1,776,432

Cumulative paid losses and loss adjustment expenses, net of reinsurance, by accident year are as follows (in thousands).

	For the years ended December 31,
Accident	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
year	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
2008		122,207		160,366		169,373		172,768		174,688		175,700		176,331		176,907		177,154	$	177,159
2009				92,372		127,355		135,701		139,436		141,399		142,294		142,441		142,654		142,700
2010						87,319		120,301		128,843		131,878		132,989		133,648		133,896		133,981
2011								82,945		113,199		120,790		123,888		125,012		125,383		125,541
2012										89,159		123,869		133,397		137,968		139,781		140,554
2013												88,726		124,021		134,931		141,444		143,481
2014														98,437		144,943		162,702		167,973
2015																129,216		208,533		227,388
2016																		163,792		238,657
2017																				120,708
Total																			$	1,618,142
Total outstanding reserves for unpaid losses and LAE, net of reinsurance																			$	158,290

As of December 31, 2017, frequency of claims by accident based on number of claimants is as follows.

Accident year	Incurred losses and LAE, net of reinsurance		Total of incurred but not reported liabilities plus expected development on reported claims		Cumulative number of reported claims
2008	$	177,892	$	—		100,189
2009		142,703		—		78,607
2010		134,000		17		71,138
2011		125,703		138		66,310
2012		141,100		366		73,546
2013		144,450		741		74,057
2014		171,372		2,449		85,334
2015		240,388		9,183		109,847
2016		275,768		27,195		117,923
2017		223,056		63,131		85,508

The average historical annual percentage payout of incurred losses by age, net of reinsurance is as follows. The amounts reflected below represent the average length of time between the occurrence of a loss and its payment.

	(Unaudited)
	Year 1			Year 2			Year 3			Year 4			Year 5			Year 6			Year 7			Year 8			Year 9			Year 10
Non-standard auto		57.4	%		28.9	%		8.2	%		3.4	%		1.3	%		0.5	%		0.2	%		0.1	%		0.0	%		0.0	%