Two new methods for determining relativity premium in Iranian bonus-malus system

Teimourian, M.; Payandeh Najafabadi, A.T.; Vahidi Asl, M.Gh.

doi:10.22056/ijir.2015.01.05

Document Type : Original Research Paper

Authors

¹ Department of Agricultural Science, Faculty of Agriculture and Basic Sciences, Islamic Azad University (Roudehen Branch), Tehran, Iran

² Department of Actuarial, Faculty of Mathematical Sciences, Shahid Beheshti University, Tehran, Iran

https://doi.org/10.22056/ijir.2015.01.05

Abstract

Computing relative premiums in Bonus-Malus systems based on Bayesian methods is used and confirmed by most of actuaries, but due to the complexity of computations, the obtained results based on the Bayesian methods are not utilizing and suitable for use in practice. Two new methods for evaluation of relative premium in the Bonus-Malus system have been proposed in the current article. The first method is based on using Maximum Entropy Theory (Maximum Uncertainty) and the second method is based on Bayesian inference for constrained parameters space under the existence of Serial relation conditions. The proposed methods are compared with Bayesian method utilizing the standards measures and optimum results obtained. Finally, the relative premium calculated utilizing the proposed methods are compared with the applied amounts in the Iranian Bonus-Malus system and the results indicated that the current system must improve.

Keywords

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Iranian Journal of Insurance Research

Two new methods for determining relativity premium in Iranian bonus-malus system

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Volume 4, Issue 1 - Serial Number 11
January 2014
Pages 76-93

Two new methods for determining relativity premium in Iranian bonus-malus system

Letters to Editor

Send comment about this article

Volume 4, Issue 1 - Serial Number 11January 2014Pages 76-93

Volume 4, Issue 1 - Serial Number 11
January 2014
Pages 76-93