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Modelling the disability severity score in motor insurance claims: an application to the Spanish case

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Author Info

  • Miguel Santolino

    ()
    (Faculty of Economics, University of Barcelona)

  • Jean-Philippe Boucher

    ()
    (Département de Mathématiques, Université du Québec à Montréal)

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    Abstract

    Bodily injury claims have the greatest impact on the claim costs of motor insurance companies. The disability severity of motor claims is assessed in numerous European countries by means of score systems. In this paper a zero inflated generalized Poisson regression model is implemented to estimate the disability severity score of victims in-volved in motor accidents on Spanish roads. We show that the injury severity estimates may beautomatically converted into financial terms by insurers at any point of the claim handling process. As such, the methodology described may be used by motor insurers operating in the Spanish market to monitor the size of bodily injury claims. By using insurance data, various applications are presented in which the score estimate of disability severity is of value to insurers, either for computing the claim compensation or for claim reserve purposes.

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    File URL: http://www.ub.edu/irea/working_papers/2009/200902.pdf
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    Bibliographic Info

    Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 200902.

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    Length: 25 pages
    Date of creation: Jan 2009
    Date of revision: Jan 2009
    Handle: RePEc:ira:wpaper:200902

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    Postal: Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona
    Web page: http://www.ub.edu/irea/
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    Related research

    Keywords: Motor accident; disability severity; zero-inflated generalized Poisson model; disability scoring scale.;

    This paper has been announced in the following NEP Reports:

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    1. Browne, Mark J & Puelz, Robert, 1999. "The Effect of Legal Rules on the Value of Economic and Non-economic Damages and the Decision to File," Journal of Risk and Uncertainty, Springer, vol. 18(2), pages 189-213, August.
    2. Ayuso, Mercedes & Santolino, Miguel, 2007. "Predicting automobile claims bodily injury severity with sequential ordered logit models," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 71-83, July.
    3. Bae, S. & Famoye, F. & Wulu, J.T. & Bartolucci, A.A. & Singh, K.P., 2005. "A rich family of generalized Poisson regression models with applications," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 69(1), pages 4-11.
    4. Helen I. Doerpinghaus & Joan T. Schmit & Jason Jia-Hsing Yeh, 2008. "Age and Gender Effects on Auto Liability Insurance Payouts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 527-550.
    5. Yip, Karen C.H. & Yau, Kelvin K.W., 2005. "On modeling claim frequency data in general insurance with extra zeros," Insurance: Mathematics and Economics, Elsevier, vol. 36(2), pages 153-163, April.
    6. 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.
    7. Crocker, Keith J & Tennyson, Sharon, 2002. "Insurance Fraud and Optimal Claims Settlement Strategies," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 469-507, October.
    8. Hoyt, Robert E & Mustard, David B & Powell, Lawrence S, 2006. "The Effectiveness of State Legislation in Mitigating Moral Hazard: Evidence from Automobile Insurance," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 427-50, October.
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