Copula models for insurance claim numbers with excess zeros and time-dependence

Xiaobing Zhao, Xian Zhou*

*Corresponding author for this work

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper develops two copula models for fitting the insurance claim numbers with excess zeros and time-dependence. The joint distribution of the claims in two successive periods is modeled by a copula with discrete or continuous marginal distributions. The first model fits two successive claims by a bivariate copula with discrete marginal distributions. In the second model, a copula is used to model the random effects of the conjoint numbers of successive claims with continuous marginal distributions. Zero-inflated phenomenon is taken into account in the above copula models. The maximum likelihood is applied to estimate the parameters of the discrete copula model. A two-step procedure is proposed to estimate the parameters in the second model, with the first step to estimate the marginals, followed by the second step to estimate the unobserved random effect variables and the copula parameter. Simulations are performed to assess the proposed models and methodologies.

Original languageEnglish
Pages (from-to)191-199
Number of pages9
JournalInsurance: Mathematics and Economics
Volume50
Issue number1
DOIs
Publication statusPublished - Jan 2012

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