Vehicle and fleet random effects in a model of insurance rating for fleets of vehicles

Jean-François Angers (), Denise Desjardins (), Georges Dionne () and François Guertin
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Jean-François Angers: Université de Montréal
Denise Desjardins: HEC Montreal, Canada Research Chair in Risk Management
François Guertin: Université de Montréal

No 04-7, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: We are proposing a parametric model to rate insurance for vehicles belonging to a fleet. The tables of premiums presented take into account past vehicle accidents, observable characteristics of the vehicles and fleets, and violations of the road-safety code committed by drivers and carriers. The premiums are also adjusted according to accidents accumulated by the fleets over time. The proposed model accounts directly for explicit changes in the various components of the probability of accidents. It represents an extension of bonus malus-type automobile insurance models for individual premiums (Lemaire, 1985; Dionne and Vanasse, 1989 and 1992; Pinquet, 1997 and 1998; Frangos and Vrontos, 2001; Purcaru and Denuit, 2003). The extension adds a fleet effect to the vehicle effect so as to account for the impact that the unobservable characteristics or actions of carriers can have on truck accident rates. This form of rating makes it possible to visualize what impact the behaviors of owners and drivers can have on the predicted rate of accidents and, consequently, on premiums. The results are compared to those of the semiparametric approach.

Keywords: Fleet of vehicles; random effects; vehicle effect; fleet effect; insurance rating; behaviors of owners and drivers; Poisson; gamma; Dirichlet; parametric model (search for similar items in EconPapers)
JEL-codes: C35 C51 G22 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2005-09-28
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Related works:
Journal Article: Vehicle and Fleet Random Effects in a Model of Insurance Rating for Fleets of Vehicles (2006)
Working Paper: Vehicle and Fleet Random Effects in a Model of Insurance Rating for Fleets of Vehicles (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2004_007

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