Sarmanov distribution for modeling dependence between the frequency and the average severity of insurance claims

Raluca Vernic, Catalina Bolancé and Ramon Alemany

Insurance: Mathematics and Economics, 2022, vol. 102, issue C, 111-125

Abstract: Real data studies emphasized situations where the classical independence assumption between the frequency and the severity of claims does not hold in the collective model. Therefore, there is an increasing interest in defining models that capture this dependence. In this paper, we introduce such a model based on Sarmanov's bivariate distribution, which has the ability of joining different types of marginals in flexible dependence structures. More precisely, we join the claims frequency and the average severity by means of this distribution. We also suggest a maximum likelihood estimation procedure to estimate the parameters and illustrate it both on simulated and real data.

Keywords: Dependence; Sarmanov distribution; Frequency; Severity; Parameters estimation (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:102:y:2022:i:c:p:111-125

DOI: 10.1016/j.insmatheco.2021.12.001

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