ON A BONUS-MALUS SYSTEM WHERE THE CLAIM FREQUENCY DISTRIBUTION IS GEOMETRIC AND THE CLAIM SEVERITY DISTRIBUTION IS PARETO

Authors : Mehmet MERT, Yasemin SAYKAN

Pages : 75-81

View : 21 | Download : 17

Publication Date : 2005-02-01

Article Type : Research Paper

Abstract :In this paper, the classical Bonus-Malus Systems insert ignore into journalissuearticles values(BMS); under which a premium is set by taking into account only the number of accidents each policyholder has, is compared with an optimal BMS under which the premium is set by taking into account both the frequency and the severity of the claims of each policyholder. The number and size of the claims an insured person has are assumed to follow a Geometric distribution and a Pareto distribution, respectively.
Keywords : Net premium principle, Quadratic error loss function, Mixed distributions