IDEAS home Printed from https://ideas.repec.org/a/sgh/annals/i37y2015p99-126.html
   My bibliography  Save this article

Bonus-malus system with premium adjustment

Author

Listed:
  • Kamil Gala

    (Ubezpieczeniowy Fundusz Gwarancyjny)

  • Wojciech Bijak

    (Szkoła Główna Handlowa w Warszawie, Ubezpieczeniowy Fundusz Gwarancyjny)

Abstract

Bonus-malus systems are a widely used method for pricing automobile insurance on the basis of individual claim history. Despite their popularity and many advantages, several modifications were proposed in the actuarial literature, but none of them, however, takes into consideration the benefit for the insured. This paper analyses the bonus-malus system, in which at the end of the insurance period the premium is adjusted according to the number of reported claims. We describe such a system using Markov chains and the credibility theory framework. Furthermore, we show how premium relativities may be derived under certain optimality criteria and we investigate their properties.

Suggested Citation

  • Kamil Gala & Wojciech Bijak, 2015. "Bonus-malus system with premium adjustment," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 37, pages 99-126.
    • Handle: RePEc:sgh:annals:i:37:y:2015:p:99-126
    as

    Download full text from publisher

    File URL: http://rocznikikae.sgh.waw.pl/p/roczniki_kae_z37_05.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Holtan, Jon, 1994. "Bonus Made Easy1," ASTIN Bulletin, Cambridge University Press, vol. 24(1), pages 61-74, May.
    2. Pitrebois, Sandra & Walhin, Jean-François & Denuit, Michel, 2005. "Bonus-malus Systems with Varying Deductibles," ASTIN Bulletin, Cambridge University Press, vol. 35(1), pages 261-274, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olena Ragulina, 2017. "Bonus--malus systems with different claim types and varying deductibles," Papers 1707.00917, arXiv.org.
    2. M Mercè Claramunt & Maite Mármol, 2021. "Is a Refundable Deductible Insurance an advantage for the insured? a mathematical approach," PLOS ONE, Public Library of Science, vol. 16(2), pages 1-22, February.
    3. Park, Sojung C. & Kim, Joseph H.T. & Ahn, Jae Youn, 2018. "Does hunger for bonuses drive the dependence between claim frequency and severity?," Insurance: Mathematics and Economics, Elsevier, vol. 83(C), pages 32-46.
    4. Centeno, M.L. & Guerra, M., 2010. "The optimal reinsurance strategy -- the individual claim case," Insurance: Mathematics and Economics, Elsevier, vol. 46(3), pages 450-460, June.
    5. Azaare Jacob & Zhao Wu, 2020. "An Alternative Pricing System through Bayesian Estimates and Method of Moments in a Bonus-Malus Framework for the Ghanaian Auto Insurance Market," JRFM, MDPI, vol. 13(7), pages 1-15, July.
    6. Tzougas, George & Karlis, Dimitris & Frangos, Nicholas, 2017. "Confidence intervals of the premiums of optimal Bonus Malus Systems," LSE Research Online Documents on Economics 70926, London School of Economics and Political Science, LSE Library.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sgh:annals:i:37:y:2015:p:99-126. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michał Bernardelli (email available below). General contact details of provider: https://edirc.repec.org/data/sgwawpl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.