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Allowance for the Age of Claims in Bonus-Malus Systems*

Published online by Cambridge University Press:  29 August 2014

Jean Pinquet ,
Montserrat Guillén  and
Catalina Bolancé
Jean Pinquet
Affiliation:
U.F.R. de Sciences Economiques, Université de Paris X, 200, avenue de la République, 92001 Nanterre Cedex, France, e-mail: [email protected]
Montserrat Guillén
Affiliation:
Departament d'Econometria, Estadistica i Economia Espanyola, Universitat de Barcelona, Diagonal, 690, 08034 Barcelona, Spain, e-mail: [email protected]
Catalina Bolancé
Affiliation:
Departament d'Econometria, Estadistica i Economia Espanyola, Universität de Barcelona, Diagonal, 690, 08034 Barcelona, Spain, e-mail: [email protected]
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Abstract

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The purpose of the paper is to use the age of claims in the prediction of risks. A dynamic random effects model on longitudinal count data is presented, and estimated on the portfolio of a major Spanish insurance company. The estimated autocorrelation coefficients of stationary random effects are decreasing. A consequence is that the predictive ability of a claim decreases with the lag between the period of risk prediction and the period of occurrence. There is a wide gap between the long term properties of actuarial and real-world experience rating schemes. This gap can be partly filled if the age of claims is taken into account in the actuarial model.

Keywords

Time-independent and dynamic random effectsAutocorrelation function for stationary random effects
Type
Workshop
Information
ASTIN Bulletin: The Journal of the IAA , Volume 31 , Issue 2 , November 2001 , pp. 337 - 348
Copyright
Copyright © International Actuarial Association 2001

Footnotes

*

Pinquet acknowledges financial support from the Fédération Française des Sociétés d'Assurance. Guillén and Bolancé thank the Spanish CICYT grant SEC99-0693. We thank a referee for his comments.

References

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