Forecasting the maximum compensation offer in the automobile BI claims negotiation proces

Mercedes Ayuso and Miguel Santolino ()
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Miguel Santolino: Faculty of Economics, University of Barcelona

No 200807, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: Most motor bodily injury (BI) claims are settled by negotiation, with fewer than 5% of cases going to court. A well-defined negotiation strategy is thus very useful for insurance companies. In this paper we assume that the monetary compensation awarded in court is the upper amount to be offered by the insurer in the negotiation process. Using a real database, a log-linear model is implemented to estimate the maximal offer. Non-spherical disturbances are detected. Correlation occurs when various claims are settled in the same judicial verdict. Groupwise heteroscedasticity is due to the influence of the forensic valuation on the final compensation amount. An alternative approximation based on generalized inference theory is applied to estimate confidence intervals on variance components, since classical interval estimates may be unreliable for datasets with unbalanced structures.

Keywords: bodily injury claims compensation; negotiation process; generalized confidence intervals. (search for similar items in EconPapers)
JEL-codes: C33 C53 G22 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2008-05, Revised 2008-05
New Economics Papers: this item is included in nep-ias
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http://www.ub.edu/irea/working_papers/2008/200807.pdf (application/pdf)

Related works:
Journal Article: Forecasting the Maximum Compensation Offer in the Automobile BI Claims Negotiation Process (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:200807

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