Everyday we face all kinds of risks, and insurance is in the business of providing us a means to transfer or share these risks, usually to eliminate or reduce the resulting financial burden, in exchange for a predetermined price or tariff. Actuaries are considered professional experts in the economic assessment of uncertain events, and equipped with many statistical tools for analytics, they he...

This paper demonstrates how a company can derive accurate classification relativities. The method uses an empirical Bay&an credibility formula as taken from the paper " Credibility for Loss Ratios " by Buhl-mann and St*,tub and modified by the IS0 Credibility Subcommittee. The data rc Ittired for this method can be purchased from the National Council. A classification review is performed on thr...

SUMMARY The Myers-Cohn Net Present Value model and NCCI's IRR model are the two leading cash flow models used in ratemaking. This paper presents simple parameter and structural changes which demonstrate their equivalency. The " fair " premium produced by both models is shown to be identical given rational and consistent rules for setting parameter values, control of the flow of surplus, and dis...

Road safety for fleets of vehicles has been neglected in the insurance literature, mainly because appropriate data is not available. This paper makes a threefold contribution: 1) Produce statistics on current fleets’ road offences using panel 20 years truck fleets; 2) relate these to accidents; and 3) identify classify riskiest ratemaking based past experience managing safety. Our results show ...

Objecrive Ratemaking data, particularly loss development pattems, for a state which has enacted major workers compensation reform is not available for a number of years following reform. As a result adjustment, or actuarial judgment, needs to be applied to historical pre-reform data to reflect expected post-refotm loss development pattems. The adjusted pattem can then be incorporated into tradi...

We present a method to integrate telematics data in pay-how-you-drive insurance pricing scheme that penalizes some near-miss events. illustrate our with sample of drivers for whom information on events and claims frequency records are available. discuss the implications motor ratemaking. Our principle is combine baseline premium added extra charges indicating risky driving (or discounts) can be...

The minimum bias method is a natural tool to use in parameterizing classification ratemaking plans. Such plans build rates for a large, heterogeneous group of insureds using arithmetic operations to combine a small set of parameters in many different ways. Since the arithmetic structure of a class plan is usually not wholly appropriate, rates for some individual classification cells may be bias...

A Bayesian Updating Approach to Crop Insurance Ratemaking by Stephen Milton Stohs Doctor of Philosophy in Agricultural and Resource Economics University of California, Berkeley Professor Peter Berck, Chair The U.S. government operates the multiple peril crop insurance (MPCI) program to provide farmers with comprehensive protection against yield risk due to weather-related causes of loss and cer...

In this article we introduce a relatively new method for deciding contingency provisions in insurance ratemaking by the use of proportional hazard(PH) transforms. This method is easy to understand, simple to use, and supported by theoretical properties as well as economic jnstification. After an introduction of the PH-transform method, we show through examples how it can be used in pricing ambi...