An alternative approach to bonus malus
Gracinda Rita Guerreiro, João Tiago Mexia (2004)
Discussiones Mathematicae Probability and Statistics
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Under the assumptions of an open portfolio, i.e., considering that a policyholder can transfer his policy to another insurance company and the continuous arrival of new policyholders into a portfolio which can be placed into any of the bonus classes and not only in the "starting class", we developed a model (Stochastic Vortices Model) to estimate the Long Run Distribution for a Bonus Malus System. These hypothesis render the model quite representative of the reality. With the obtained...