A Systematic Literature Review of Insurance Claims Risk Measurement Using the Hidden Markov Model

Hilda Azkiyah Surya, Sukono (), Herlina Napitupulu and Noriszura Ismail
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Hilda Azkiyah Surya: Doctoral Program in Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Sumedang 45363, Indonesia
Sukono: Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Sumedang 45363, Indonesia
Herlina Napitupulu: Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Sumedang 45363, Indonesia
Noriszura Ismail: Department of Mathematical Sciences, Faculty of Sciences and Technology, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia

Risks, 2024, vol. 12, issue 11, 1-18

Abstract: In the rapidly evolving field of insurance, accurate risk measurement is crucial for effective claims management and financial stability. Therefore, this research presented a systematic literature review (SLR) on insurance claims risk measurement using the Hidden Markov Model (HMM). Bibliometric analysis was conducted using VOSviewer 1.6.20 and ResearchRabbit software to map research trends and collaboration networks in this topic. This review explored the implementation of the HMM in predicting the frequency and severity of insurance claims, with a focus on the statistical distribution methods used. In addition, the research emphasized the influence of the number of hidden states in the HMM on claims behavior, both in terms of frequency and magnitude, and provided interpretations of these hidden dynamics. Data sources for this review comprised three databases, namely, Scopus, ScienceDirect, and Dimensions, and additional papers from a website. The article selection process followed updated PRISMA 2020 guidelines, resulting in twelve key papers relevant to the topic. The results offered insights into the application of the HMM for forecasting the frequency and severity of insurance claims and opened avenues for further investigation on distribution models and hidden state modeling.

Keywords: insurance claims; risk measurement; SLR; bibliometric analysis; Hidden Markov Model (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2024
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