Improving global elasticity of bonus-malus system Cover Image

Improving global elasticity of bonus-malus system
Improving global elasticity of bonus-malus system

Author(s): Marcin Topolewski, Michał Bernardelli
Subject(s): Supranational / Global Economy, Globalization
Published by: Szkoła Główna Gospodarstwa Wiejskiego w Warszawie
Keywords: bonus-malus system; transition rules; optimization; premium elasticity; automobile insurance;

Summary/Abstract: We optimize transition rules of bonus-malus system to achieve possibly best premium elasticity as defined by Loimaranta [1972] and later generalized as global elasticity by De Pril [1978]. We use premium scale given by Norberg [1976]. This issue constitutes a nonlinear non-convex discrete optimization problem. To solve this problem, we apply improved greedy optimization algorithm, similar to one proposed by Morlock [1984].We analyse systems of different size for portfolios characterized by inverse Gaussian risk structure function with various parameters. We also propose alternative measures of global elasticity.

  • Issue Year: XVIII/2017
  • Issue No: 1
  • Page Range: 120-133
  • Page Count: 14
  • Language: English