A priori ratemaking using bivariate Poisson regression models

Lluís Bermúdez Morata

Insurance: Mathematics and Economics, 2009, vol. 44, issue 1, pages 135-141

Abstract: In automobile insurance, it is useful to achieve a priori ratemaking by resorting to generalized linear models, and here the Poisson regression model constitutes the most widely accepted basis. However, insurance companies distinguish between claims with or without bodily injuries, or claims with full or partial liability of the insured driver. This paper examines an a priori ratemaking procedure when including two different types of claim. When assuming independence between claim types, the premium can be obtained by summing the premiums for each type of guarantee and is dependent on the rating factors chosen. If the independence assumption is relaxed, then it is unclear as to how the tariff system might be affected. In order to answer this question, bivariate Poisson regression models, suitable for paired count data exhibiting correlation, are introduced. It is shown that the usual independence assumption is unrealistic here. These models are applied to an automobile insurance claims database containing 80,994 contracts belonging to a Spanish insurance company. Finally, the consequences for pure and loaded premiums when the independence assumption is relaxed by using a bivariate Poisson regression model are analysed.

Keywords: IB40; IM11; Bivariate; Poisson; regression; models; Zero-inflated; models; Automobile; insurance; Bootstrap; methods; A; priori; ratemaking (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6V8N ... 8c2385ea111eca5b0479
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:insuma:v:44:y:2009:i:1:p:135-141

Access Statistics for this article

Insurance: Mathematics and Economics is edited by R. Kaas, H. U. Gerber, M. J. Goovaerts and E. S. W. Shiu

More articles in Insurance: Mathematics and Economics from Elsevier
Series data maintained by Heidi Boesdal ().