Pure risk premiums under deductibles. A quantitative management in actuarial practice

Krzysztof Burnecki, Joanna Nowicka-Zagrajek and Aleksander Weron

No HSC/04/05, HSC Research Reports from Hugo Steinhaus Center, Wroclaw University of Science and Technology

Abstract: It is common practice in most insurance lines for the coverage to be restricted by a deductible. In the paper we investigate the influence of deductibles on pure risk premiums. We derive simple but practical formulae for premiums under franchise, fix amount, proportional, limited proportional and disappearing deductibles in terms of the limited expected value function. Next, we apply the results to typical loss distributions, i.e. lognormal, Pareto, Burr, Weibull and gamma. Finally, we analyse a loss data of one of the power companies. We fit distributions to the data and show how the choice of the distribution and a deductible influences the premium.

Keywords: Insurance risk premium; Deductible; Limited expected value function (search for similar items in EconPapers)
JEL-codes: C16 G13 G22 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_04_05.pdf Draft, 2004 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:wuu:wpaper:hsc0405

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