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Regression Modeling with Actuarial and Financial Applications by Edward W. Frees

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18

Credibility and Bonus-Malus

Chapter Preview. This chapter introduces regression applications of pricing in credibility and bonus-malus experience rating systems. Experience rating systems are formal methods for including claims experience into renewal premiums of short-term contracts, such automobile, health, and workers’ compensation. This chapter provides brief introductions to credibility and bonus-malus, emphasizing their relationship with regression methods.

18.1 Risk Classification and Experience Rating

Risk classification is a key ingredient of insurance pricing. Insurers sell coverage at prices that are sufficient to cover anticipated ...

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