The Application of Bühlmann‑Straub Model with Data Correction for the Estimation of Net Premium Rates in Bonus‑Malus Systems of the Motor Third Liability Insurance

Anna Edyta Szymańska

doi:10.18778/0208-6018.336.01

Authors

Anna Edyta Szymańska University of Łódź, Faculty of Economics and Sociology, Department of Insurance

DOI:

https://doi.org/10.18778/0208-6018.336.01

Keywords:

credibility theory, Bühlmann‑Straub model, bonus‑malus system, net premiums rates, motor third liability insurance

Abstract

One of the elements used in the process of tariff calculation of premiums in motor liability insurance is a bonus‑malus system. This systems takes into account the “claims ratio” by means of increases and discounts of the base premium called net premium rates. The aim of this work is to propose an estimation method of the net premium rates in the bonus‑malus classes of the motor third‑party liability insurance portfolio of individuals. The Bühlmann‑Straub model was used for the premium estimation. In order to improve the credibility of the estimated premium rates, a data correction in the classes with premium increase was preformed. An example of the application of the new method is presented based on the data obtained from one of the insurance companies operating on the Polish market, which has reserved the right to stay anonymous.

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