Efficiency of bonus-malus system
| Authors | |
|---|---|
| Year of publication | 2014 |
| Type | Article in Proceedings |
| Conference | ŘÍZENÍ A MODELOVÁNÍ FINANČNÍCH RIZIK |
| MU Faculty or unit | |
| Citation | |
| Field | Applied statistics, operation research |
| Keywords | Bonus-malus system; Markov chain; relative premium; Loimaranta efficiency |
| Description | This paper deals with bonus-malus (BM) system in vehicle insurance. This system penalizes drivers responsible for accidents and rewards the drivers for claim-free years. First the long term behaviour of BM system is studied. Then the relative Bayesian premium associated with each level of BM system is suggested for insurance portfolio. For this purposes, minimization of quadratic loss function and Bayesian approach are used. The calculated relative premium is compared to the relative premium from Czech Insurance Company. Finally, the efficiency of bonus-malus system is evaluated by Loimaranta efficiency. |