Adjusting the premium relativities in a bonus-malus system

an integrated approach using the first claim time and the number of claims

Rahim Mahmoudvand, Chong It Tan, Narges Abbasi

Research output: Contribution to journalArticle

Abstract

In this paper, we propose an integrated approach to adjust the premium relativities in a bonus-malus system by using the information of the first claim time (expressed in terms of sub-period in a year) and the number of claims reported by individual policyholder. We provide a formal representation for the newly proposed structure and derive the analytical expressions for the adjusted premium relativities. Other things being equal, a lower adjusted premium relativity is imposed for an earlier sub-period of the first claim made, whereas policyholders with more claims are subject to a higher adjusted premium relativity.
Original languageEnglish
Pages (from-to)1-19
Number of pages19
JournalAsia-Pacific journal of risk and insurance
Volume11
Issue number2
DOIs
Publication statusPublished - 1 Jul 2017

Keywords

  • bonus-malus system
  • premium relativities
  • claims count

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