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 ...