Please use this identifier to cite or link to this item:
Asmussen, Søren
Year of Publication: 
[Journal:] Risks [ISSN:] 2227-9091 [Publisher:] MDPI [Place:] Basel [Volume:] 2 [Year:] 2014 [Issue:] 1 [Pages:] 49-73
In a bonus-malus system in car insurance, the bonus class of a customer is updated from one year to the next as a function of the current class and the number of claims in the year (assumed Poisson). Thus the sequence of classes of a customer in consecutive years forms a Markov chain, and most of the literature measures performance of the system in terms of the stationary characteristics of this Markov chain. However, the rate of convergence to stationarity may be slow in comparison to the typical sojourn time of a customer in the portfolio. We suggest an age-correction to the stationary distribution and present an extensive numerical study of its effects. An important feature of the modeling is a Bayesian view, where the Poisson rate according to which claims are generated for a customer is the outcome of a random variable specific to the customer.
actuarial mathematics
Bayes premium
equilibrium distribution
experience rating
insurance portfolio
Markov chain
motor insurance
Poisson claims
stationary distribution
Persistent Identifier of the first edition: 
Creative Commons License:
Document Type: 
Appears in Collections:

Files in This Item:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.