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Experience rating in non-life insurance

Author

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  • Jean Pinquet

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper presents statistical models which lead to experience rating in insurance. Serial correlation for risk variables can receive endogeneous or exogeneous explanations. The interpretation retained by actuarial models is exogeneous and reflects the positive contagion usually observed for the number of claims. This positive contagion can be explained by the revelation throughout time of a hidden features in the risk distributions. These features are represented by fixed effects which are predicted with a random effects model. This article discusses identification issues on the nature of the dynamics of non-life insurance data. Example of predictions are given for count data models with a constant or time-varying random effects, one or several equations, and for cost-number models on events.

Suggested Citation

  • Jean Pinquet, 2012. "Experience rating in non-life insurance," Working Papers hal-00677100, HAL.
  • Handle: RePEc:hal:wpaper:hal-00677100 Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00677100
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    References listed on IDEAS

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    1. Angers, Jean-François & Desjardins, Denise & Dionne, Georges & Guertin, François, 2006. "Vehicle and Fleet Random Effects in a Model of Insurance Rating for Fleets of Vehicles," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 36(01), pages 25-77, May.
    2. Dionne, G. & Vanasse, C., 1988. "A Generalization Of Automobile Insurance Rating Models: The Negative Binomial Distribution With A Regression Component," Cahiers de recherche 8833, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Jaap H. Abbring & Pierre-André Chiappori & Jean Pinquet, 2003. "Moral Hazard and Dynamic Insurance Data," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 767-820, June.
    4. Pinquet, Jean, 1998. "Designing Optimal Bonus-Malus Systems from Different Types of Claims," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 28(02), pages 205-220, November.
    5. Desjardins, Denise & Dionne, Georges & Pinquet, Jean, 2001. "Experience Rating Schemes for Fleets of Vehicles," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 31(01), pages 81-105, May.
    6. Lillard, Lee A., 1993. "Simultaneous equations for hazards : Marriage duration and fertility timing," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 189-217, March.
    7. Bolancé, Catalina & Guillén, Montserrat & Pinquet, Jean, 2008. "On the link between credibility and frequency premium," Insurance: Mathematics and Economics, Elsevier, vol. 43(2), pages 209-213, October.
    8. 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: The Journal of the International Actuarial Association, Cambridge University Press, vol. 36(01), pages 285-301, May.
    9. Bourgeon, Jean-Marc & Picard, Pierre, 2007. "Point-record driving licence and road safety: An economic approach," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 235-258, February.
    10. Bolance, Catalina & Guillen, Montserrat & Pinquet, Jean, 2003. "Time-varying credibility for frequency risk models: estimation and tests for autoregressive specifications on the random effects," Insurance: Mathematics and Economics, Elsevier, vol. 33(2), pages 273-282, October.
    11. repec:cup:astinb:v:19:y:1989:i:02:p:199-212_00 is not listed on IDEAS
    12. Georges Dionne & Jean Pinquet & Mathieu Maurice & Charles Vanasse, 2011. "Incentive Mechanisms for Safe Driving: A Comparative Analysis with Dynamic Data," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 218-227, February.
    13. J. Pinquet, 1997. "Experience rating through heterogeneous models," THEMA Working Papers 97-25, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    14. Frees, Edward W. & Valdez, Emiliano A., 2008. "Hierarchical Insurance Claims Modeling," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1457-1469.
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    Cited by:

    1. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.

    More about this item

    Keywords

    linear credibility approach; Fixed and random effects; overdispersion; expected value principle; linear credibility approach.;

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