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Credibility Models with Time-Varying Trend Components

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  • Ledolter, Johannes
  • Klugman, Stuart
  • Lee, Chang-Soo

Abstract

Traditional credibility models have treated the process generating the losses as stable over time, perhaps with a deterministic trend imposed. However, there is ample evidence that these processes are not stable over time. What is required is a method that allows for time-varying parameters in the process, yet still provides the shrinkage needed for sound ratemaking. In this paper we use an automobile insurance example to illustrate how this can be accomplished.

Suggested Citation

  • Ledolter, Johannes & Klugman, Stuart & Lee, Chang-Soo, 1991. "Credibility Models with Time-Varying Trend Components," ASTIN Bulletin, Cambridge University Press, vol. 21(1), pages 73-91, April.
    • Handle: RePEc:cup:astinb:v:21:y:1991:i:01:p:73-91_00
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    Cited by:

    1. Frees, Edward W. & Young, Virginia R. & Luo, Yu, 1999. "A longitudinal data analysis interpretation of credibility models," Insurance: Mathematics and Economics, Elsevier, vol. 24(3), pages 229-247, May.
    2. Apostolos Bozikas & Georgios Pitselis, 2019. "Credible Regression Approaches to Forecast Mortality for Populations with Limited Data," Risks, MDPI, vol. 7(1), pages 1-22, February.
    3. Frits Bijleveld & Jacques Commandeur & Phillip Gould & Siem Jan Koopman, 2008. "Model‐based measurement of latent risk in time series with applications," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(1), pages 265-277, January.
    4. Helena Jasiulewicz, 2013. "Przestrzeń stanów i filtr Kalmana w teorii ubezpieczeń," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 31, pages 101-116.

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