Optimal Insurance Coverage under Bonus-Malus Contracts

Holtan, Jon

doi:10.2143/ast.31.1.1001

Cited by 12 publications

(8 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…These questions lead to a classical field of insurance economics: optimal insurance coverage. Holtan (2001), which is based on -and a direct extension of -this paper, analyses these questions particularly for bonus-malus contracts.…”

Section: Discussionmentioning

confidence: 99%

“…This question is in fact part of the general problem of purchasing optimal insurance coverage, which has been extensively studied under varying conditions in insurance economics. Holtan (2001) analyses this problem particularly for bonus-malus contracts. But to do so, we first have to outline the necessary concepts of -and insight to -bonus-malus contracts, which is part of the objective of this paper.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Optimal Loss Financing Under Bonus-Malus Contracts

Holtan¹

2001

ASTIN Bull.

Self Cite

View full text Add to dashboard Cite

The paper analyses the question: Should an insurance customer carry an occurred loss himself, or should he make a claim to the insurance company? This question is important within bonus-malus contracts with individual experience adjustments of the premium. The analysis model includes a bonus hunger strategy where the customers prefer the most profitable financial alternative, that is, the alternative which represents the lowest rate of interest. Hence the loss of bonus after a claim is calculated as a rate of interest paid from the customer to the insurer. Within this model the paper outlines the existence of a true compensation function and a relative cost function for each customer. A set of properties for bonus-malus contracts are presented and discussed. A concrete example of a bonus-malus system and an insurance compensation function illustrates the theoretical framework in a practical manner.

show abstract

Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Optimal Loss Financing Under Bonus-Malus Contracts

Holtan¹

2001

ASTIN Bull.

Self Cite

View full text Add to dashboard Cite

show abstract

“…An example of a mix of these elements is e.g. treated in Holtan (2001), with focus on customer purchasing rationality of individual insurance bonus-malus contracts. This wide business approach demands definitely a dynamic pricing approach, that is, a process which continuously or regularly… -adjust the price levels to reach risk ratio and combined ratio goals, -innovate, update and re-estimate risk price models and parameters, -track competitors' price rates and product/service value propositions, -test market price adjustments to learn optimal price adjustments, -implement champion-challenger price adjustments, -communicate with distribution departments to optimize the sales forces.…”

Section: International Best Practice Of Insurance Pricingmentioning

confidence: 99%

Pragmatic insurance option pricing

Holtan¹

2007

Scandinavian Actuarial Journal

Self Cite

View full text Add to dashboard Cite

This paper deals with theoretical and practical pricing of non-life insurance contracts within a financial option pricing context. The market based assumption approach of the option context fits well into the practical nature of non-life insurance pricing and valuation. Basic facts in most insurance markets like the existence of quite different insurer price offers on the same claims risk in the same market, support the need for this approach. The paper outlines insurance and option pricing in a parallel setup. First it takes a complete market approach, focusing dynamic hedging, no-arbitrage and risk-neutral martingale valuation principles within insurance and options. Secondly it takes an incomplete market view by introducing supply and demand effects via purchasing preferences in the market. Finally the paper discusses pragmatic insurance price models, parameter estimation techniques and international best practice of insurance pricing. The overall aim of the paper is to describe and unite the headlines of the more or less common insurance and option price theory, and hence increase the pragmatic understanding of this theory from a business point of view. KeywordsInsurance and financial option contracts; insurance and option pricing theory; complete and incomplete markets; dynamic hedging and no-arbitrage; risk-neutral martingales; purchasing preferences; risk, cost and market price adjustments; parameter estimation; pragmatic and best practice pricing.2

show abstract

“…They proved that an insured would file a claim only if it is larger than some critical value that is higher than the positive deductible amount. Holtan [8,9] investigated the characteristics of the deductible insurance policy in the presence of the bonus-malus adjustments and showed that the bonus-malus policies cannot be mutually optimal (in sense of being Pareto optimal) to both the insured and the insurer.…”

Section: Introductionmentioning

confidence: 99%

Fair Actuarial Values for Deductible Insurance Policies in the Presence of Parameter Uncertainty

Harel

Harpaz

2007

Int. J. Theor. Appl. Finan.

View full text Add to dashboard Cite

This paper derives the multi-period fair actuarial values for six deductible insurance policies offered in today's insurance markets. The loss in any given period is generated by the Weibull distribution with a known shape parameter but an unknown scale parameter. The insurer is assumed to be a Bayesian decision maker, in the sense that he/she learns sequentially about the unknown scale parameter by observing the realizations of the filed claims. It is shown that the insurer's underlying predictive loss distributions belong to the Burr family, and the multi-period actuarially fair policy value can be derived. With a proper loading, an insurance premium can be quoted. Our major contribution is the analytical derivations of the fair actuarial values for deductible insurance policies in the presence of parameter uncertainty and Bayesian learning.

show abstract

Optimal Insurance Coverage under Bonus-Malus Contracts

Cited by 12 publications

References 9 publications

Optimal Loss Financing Under Bonus-Malus Contracts

Optimal Loss Financing Under Bonus-Malus Contracts

Pragmatic insurance option pricing

Fair Actuarial Values for Deductible Insurance Policies in the Presence of Parameter Uncertainty

Contact Info

Product

Resources

About