Optimal Claiming Strategies in Bonus Malus Systems and Implied Markov Chains

Arthur Charpentier, Arthur David () and Romuald Elie
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Arthur David: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Romuald Elie: LAMA - Laboratoire d'Analyse et de Mathématiques Appliquées - UPEM - Université Paris-Est Marne-la-Vallée - BEZOUT - Fédération de Recherche Bézout - CNRS - Centre National de la Recherche Scientifique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, we investigate the impact of the claim reporting strategy of drivers, within a bonus malus system. We exhibit the induced modification of the corresponding class level transition matrix and derive the optimal reporting strategy for rational drivers. The hunger for bonuses induces optimal thresholds under which, drivers do not claim their losses. A numerical algorithm is provided for computing such thresholds and realistic numerical applications are discussed.

Keywords: bonus malus; markov chains (search for similar items in EconPapers)
Date: 2016-06-05
New Economics Papers: this item is included in nep-cmp
Note: View the original document on HAL open archive server: https://hal.science/hal-01326798v1
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Citations: View citations in EconPapers (2)

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