Publication details

Efficiency of bonus-malus system

Authors

KAFKOVÁ Silvie

Year of publication 2014
Type Article in Proceedings
Conference ŘÍZENÍ A MODELOVÁNÍ FINANČNÍCH RIZIK
MU Faculty or unit

Faculty of Economics and Administration

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.

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