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Bonus-Malus premiums under the dependent frequency-severity modeling

Title
Bonus-Malus premiums under the dependent frequency-severity modeling
Authors
Oh, RosyShi, PengAhn, Jae Youn
Ewha Authors
안재윤
SCOPUS Author ID
안재윤scopus
Issue Date
2020
Journal Title
SCANDINAVIAN ACTUARIAL JOURNAL
ISSN
0346-1238JCR Link

1651-2030JCR Link
Citation
SCANDINAVIAN ACTUARIAL JOURNAL vol. 2020, no. 3, pp. 172 - 195
Keywords
Frequency-severity dependencebonus-malus systemcopulabivariate random effects
Publisher
TAYLOR &

FRANCIS LTD
Indexed
SCIE; SSCI; SCOPUS WOS
Document Type
Article
Abstract
A Bonus-Malus System (BMS) in insurance is a premium adjustment mechanism widely used in a posteriori ratemaking process to set the premium for the next contract period based on a policyholder's claim history. The current practice in BMS implementation relies on the assumption of independence between claim frequency and severity, despite the fact that a series of recent studies report evidence of a significant frequency-severity relationship, particularly in automobile insurance. To address this discrepancy, we propose a copula-based correlated random effects model to accommodate the dependence between claim frequency and severity, and further illustrate how to incorporate such dependence into the current BMS. We derive analytical solutions to the optimal relativities under the proposed framework and provide numerical experiments based on real data analysis to assess the effect of frequency-severity dependence in BMS ratemaking.
DOI
10.1080/03461238.2019.1655477
Appears in Collections:
자연과학대학 > 통계학전공 > Journal papers
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