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Fixed versus Random Effects in Poisson Regression Models for Claim Counts: A Case Study with Motor Insurance

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  • Boucher, Jean-Philippe
  • Denuit, Michel

Abstract

This paper examines the validity of some stylized statements that can be found in the actuarial literature about random effects models. Specifically, the actual meaning of the estimated parameters and the nature of the residual heterogeneity are discussed. A numerical illustration performed on a Belgian motor third party liability portfolio supports this discussion.

Suggested Citation

  • Boucher, Jean-Philippe & Denuit, Michel, 2006. "Fixed versus Random Effects in Poisson Regression Models for Claim Counts: A Case Study with Motor Insurance," ASTIN Bulletin, Cambridge University Press, vol. 36(1), pages 285-301, May.
    • Handle: RePEc:cup:astinb:v:36:y:2006:i:01:p:285-301_01
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    Cited by:

    1. Safet Kurtovic & Sead Talovic, 2015. "Liberalization of Trade with the European Union and its Impact on the Reduction in Central European Free Trade Agreement 2006 Trade Balance Deficit," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 552-565.
    2. Jean‐Philippe Boucher & Michel Denuit & Montserrat Guillen, 2009. "Number of Accidents or Number of Claims? An Approach with Zero‐Inflated Poisson Models for Panel Data," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(4), pages 821-846, December.
    3. Bermúdez i Morata, Lluís, 2009. "A priori ratemaking using bivariate Poisson regression models," Insurance: Mathematics and Economics, Elsevier, vol. 44(1), pages 135-141, February.
    4. Lee, Woojoo & Kim, Jeonghwan & Ahn, Jae Youn, 2020. "The Poisson random effect model for experience ratemaking: Limitations and alternative solutions," Insurance: Mathematics and Economics, Elsevier, vol. 91(C), pages 26-36.
    5. Lluis Bermúdez i Morata, 2008. "A priori ratemaking using bivariate poisson regression models," Working Papers XREAP2008-09, Xarxa de Referència en Economia Aplicada (XREAP), revised Jul 2008.
    6. Denise Desjardins & Georges Dionne & Yang Lu, 2023. "Hierarchical random‐effects model for the insurance pricing of vehicles belonging to a fleet," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(2), pages 242-259, March.
    7. Spark C. Tseung & Ian Weng Chan & Tsz Chai Fung & Andrei L. Badescu & X. Sheldon Lin, 2022. "A Posteriori Risk Classification and Ratemaking with Random Effects in the Mixture-of-Experts Model," Papers 2209.15212, arXiv.org.
    8. Jean-Philippe Boucher & Roxane Turcotte, 2020. "A Longitudinal Analysis of the Impact of Distance Driven on the Probability of Car Accidents," Risks, MDPI, vol. 8(3), pages 1-19, September.
    9. Jean Pinquet, 2012. "Experience rating in non-life insurance," Working Papers hal-00677100, HAL.
    10. Alicja Wolny-Dominiak & Tomasz Żądło, 2021. "The Measures of Accuracy of Claim Frequency Credibility Predictor," Sustainability, MDPI, vol. 13(21), pages 1-13, October.
    11. Bermúdez, Lluís & Karlis, Dimitris, 2011. "Bayesian multivariate Poisson models for insurance ratemaking," Insurance: Mathematics and Economics, Elsevier, vol. 48(2), pages 226-236, March.
    12. Boucher, Jean-Philippe & Denuit, Michel, 2008. "Credibility premiums for the zero-inflated Poisson model and new hunger for bonus interpretation," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 727-735, April.

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