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On the Convergence Rate of Bonus-Malus Systems

Published online by Cambridge University Press:  29 August 2014

Heikki Bonsdorff
Heikki Bonsdorff*
Affiliation:
Ministry of Social Affairs and Health, Helsinki, Finland
*
Ministry of Social Affairs and Health, Hallituskatu 5, 00170 Helsinki, Finland.
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Abstract

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Under certain conditions, a Bonus-Malus system can be interpreted as a Markov chain whose n-step transition probabilities converge to a limit probability distribution. In this paper, the rate of the convergence is studied by means of the eigenvalues of the transition probability matrix of the Markov chain.

Keywords

Bonus-Malus systemsrate of convergenceMarkov chainseigenvaluesautomobile insurance
Type
Workshop
Information
ASTIN Bulletin: The Journal of the IAA , Volume 22 , Issue 2 , November 1992 , pp. 217 - 223
Copyright
Copyright © International Actuarial Association 1992

References

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