Study of Factors Influencing the Risk and their Relation to Credibility Theory

The study and analysis of the various factors influencing insurance risks constitutes an intricate and usually quite extensive problem. We have to consider on the one hand the nature and heterogeneity of the elements we have been able to measure, and on the other the problem of deciding—without knowing exactly what results to expect—on the types of analysis to carry out and the form in which to present the results.These difficulties, essentially stemming from the fact that we cannot easily define “a priori†a measure of influence, can be overcome only by using highly sophisticated mathematical models. The researcher must define his objectives clearly if he is to avoid spending too much of his time in exploring such models.Either for these reasons or for lack of our experience in this field we were led to the study of three models, presenting entirely different characteristics though based on the analysis and behaviour of mean value fluctuations, measured by their variances or by the least-squares method.Our first model, described in II. 1, associates the notion of influence with the notion of variance. It analyses in detail the alteration of the mean values variance, when what we refer to as a “margination†is executed in the parameter space, taking each of the parameters in turn. We start off by having n distinct parameters, reducing them by one with each step.