 An approach to merit rating by means of autoregressive sequencesLászló Martinek and N. Miklós Arató Insurance: Mathematics and Economics, 2019, vol. 85, issue C, 205-217 Abstract: A posteriori ratemaking is widely applied in the premium calculation of property and casualty products, particularly in third-party automobile insurance, which usually uses a bonus–malus system for premium adjustment. The present paper suggests an alternative to common frameworks that are designed as random walks on graphs of mostly finite states representing premium levels. The proposed premium calculation model is governed by the policyholder’s claim history through a recursive equation. This new autoregressive scheme is structurally different from the ones in use. Relevant metrics that measure the system’s optimality are evaluated, partially in analytical form. Through a comparison with existing models and parameterisation from real-life data, the new model is put into context and its practical relevance is investigated. Keywords: Autoregressive processes; bonus–malus systems; Model optimisation; Experience rating; Financial equilibrium (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:85:y:2019:i:c:p:205-217 DOI: 10.1016/j.insmatheco.2019.01.008 Access Statistics for this article Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu More articles in Insurance: Mathematics and Economics from Elsevier |
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