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The Development of an Optimal Bonus-Malus System in a Competitive Market

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  • Baione, Fabio
  • Levantesi, Susanna
  • Menzietti, Massimiliano

Abstract

BMS in force show a progressive reduction of the observed average premium, which causes a financial imbalance in the system (see Lemaire (1995)). As a onsequence, frequent premium adjustments become necessary and result in discrepancy between the reduction defined in the policy contract and the ffective discount applied to the driver. Most policyholders are not aware of his “lack of transparency†. This paper deals with the problem of designing an optimal tariff structure so that the designed BMS is adequate and satisfies both transparency and financial balance conditions.

Suggested Citation

  • Baione, Fabio & Levantesi, Susanna & Menzietti, Massimiliano, 2002. "The Development of an Optimal Bonus-Malus System in a Competitive Market," ASTIN Bulletin, Cambridge University Press, vol. 32(1), pages 159-170, May.
    • Handle: RePEc:cup:astinb:v:32:y:2002:i:01:p:159-170_01
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    Cited by:

    1. Yang Lu, 2018. "Dynamic Frailty Count Process in Insurance: A Unified Framework for Estimation, Pricing, and Forecasting," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 85(4), pages 1083-1102, December.
    2. Dhiti Osatakul & Xueyuan Wu, 2021. "Discrete-Time Risk Models with Claim Correlated Premiums in a Markovian Environment," Risks, MDPI, vol. 9(1), pages 1-23, January.
    3. Villar Frexedas, Oscar & Vayá, Esther, 2005. "Financial Contagion between Economies: an Exploratory Spatial Analysis/Contagio financiero entre economías: Un análisis exploratorio espacial," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 23, pages 151-165, Abril.

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