Discount effects on the composition of the risk portfolio of the third-party vehicle insurance

Manteghipour, M.; Aalaei, M.

doi:10.22056/ijir.2021.02.01

Document Type : Original Research Paper

Authors

M. Manteghipour ¹
M. Aalaei ²

¹ Depertment of New Technologies Research in Insurance, Insurance Research center, Tehran, Iran

² Depertment of Indivisual Insurance Research, Insurance Research center, Tehran, Iran

https://doi.org/10.22056/ijir.2021.02.01

Abstract

Objective: Some Iranian insurance companies issue third-party insurance policies at lower rates to attract more premiums and a larger portfolio, and therefore offer higher discounts. In this article, we are looking for the answer to the question of how the insurance premiums affect the claim rates.
Methodology: The effect of vehicle third party insurance discount rates was examined using the data of an insurance company during 6 years. The discount rate was very scattered in the data. Therefore, it was necessary to use a method to determine in which year the claims rate was higher to study how the discounts affect the claims rate. Hence, we have constructed fuzzy numbers using the discount rate quarters and have ranked these numbers using the appropriate method.
Findings: The results show that the more premium discounts, the riskier risks are gathered. Also, more discounts for auto cars have been less attractive and this type of car has a lower loss ratio.
Conclusions: Overall, the result of this study shows that the premium reduction strategy, in addition to reducing the company's income from insurance premiums, leads to an increase in the loss ratio due to the issuance riskier policies.
JEL Classification: C10, E30, G22

Keywords

Main Subjects

Insurance pricing

References

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Iranian Journal of Insurance Research

Discount effects on the composition of the risk portfolio of the third-party vehicle insurance

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Volume 10, Issue 2 - Serial Number 36
April 2021
Pages 73-86

Discount effects on the composition of the risk portfolio of the third-party vehicle insurance

References

References

Letters to Editor

Send comment about this article

Volume 10, Issue 2 - Serial Number 36April 2021Pages 73-86

Volume 10, Issue 2 - Serial Number 36
April 2021
Pages 73-86