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Adjusting the Premium Relativities in a Bonus-Malus System: An Integrated Approach Using the First Claim Time and the Number of Claims

Author

Listed:
  • Mahmoudvand Rahim

    (Department of Statistics, Bu-Ali Sina University, Hamedan, Iran)

  • Tan Chong It

    (Department of Applied Finance and Actuarial Studies, Macquarie University, New South Wales, Australia)

  • Abbasi Narges

    (Department of Statistics, Payame Noor University, I. R.Iran)

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.

Suggested Citation

  • Mahmoudvand Rahim & Tan Chong It & Abbasi Narges, 2017. "Adjusting the Premium Relativities in a Bonus-Malus System: An Integrated Approach Using the First Claim Time and the Number of Claims," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 11(2), pages 1-19, July.
    • Handle: RePEc:bpj:apjrin:v:11:y:2017:i:2:p:19:n:3
    DOI: 10.1515/apjri-2016-0038
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    References listed on IDEAS

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    Cited by:

    1. Okura Mahito & Yoshizawa Takuya & Sakaki Motohiro, 2021. "An Evaluation of the New Japanese Bonus–Malus System with No-claim and Claimed Subclasses," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 15(1), pages 1-12, January.

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