Allowance for the Age of Claims in Bonus-Malus Systems*

Jean Pinquet, Montserrat Guillén and Catalina Bolancé

ASTIN Bulletin, 2001, vol. 31, issue 2, 337-348

Abstract: The purpose of the paper is to use the age of claims in the prediction of risks. A dynamic random effects model on longitudinal count data is presented, and estimated on the portfolio of a major Spanish insurance company. The estimated autocorrelation coefficients of stationary random effects are decreasing. A consequence is that the predictive ability of a claim decreases with the lag between the period of risk prediction and the period of occurrence. There is a wide gap between the long term properties of actuarial and real-world experience rating schemes. This gap can be partly filled if the age of claims is taken into account in the actuarial model.

Date: 2001
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