Multiperil rate making for property insurance using longitudinal data

Lu Yang; Peng Shi

doi:10.1111/rssa.12419

Multiperil rate making for property insurance using longitudinal data

Lu Yang, Peng Shi

Research output: Contribution to journal › Article › peer-review

17 Scopus citations

Abstract

In property insurance, a contract often provides the policyholder with protection against damages to the insured properties that arise from a variety of perils. We propose a multivariate framework for pricing property insurance contracts with multiperil coverage in a longitudinal context. Specifically, a two-part model is employed to accommodate the excess of 0s and heavy tails in the insurance loss cost, and a Gaussian copula with a structured correlation is used to capture the dependence within and between perils, as well as their interaction. Using the government property insurance data from the state of Wisconsin in the USA, we show that the multiperil claim model has important implications in both experience rating and risk margin analysis.

Original language	English (US)
Pages (from-to)	647-668
Number of pages	22
Journal	Journal of the Royal Statistical Society. Series A: Statistics in Society
Volume	182
Issue number	2
DOIs	https://doi.org/10.1111/rssa.12419
State	Published - Feb 1 2019
Externally published	Yes

Bibliographical note

Funding Information:
We thank the Joint Editor and two reviewers for their comments that helped to improve the presentation of the paper. Peng Shi acknowledges the support by the Centers of Actuarial Excellence research grant from the Society of Actuaries and the Fall Research Competition from the University of Wisconsin–Madison.

Funding Information:
We thank the Joint Editor and two reviewers for their comments that helped to improve the presentation of the paper. Peng Shi acknowledges the support by the Centers of Actuarial Excellence research grant from the Society of Actuaries and the Fall Research Competition from the University of Wisconsin?Madison.

Publisher Copyright:
© 2018 The Authors Journal of the Royal Statistical Society: Series A (Statistics in Society) Published by John Wiley & Sons Ltd on behalf of Royal Statistical Society.

Keywords

Gaussian copula
Multiperil rate making
Multivariate longitudinal data
Predictive distribution
Zero inflation

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abstract = "In property insurance, a contract often provides the policyholder with protection against damages to the insured properties that arise from a variety of perils. We propose a multivariate framework for pricing property insurance contracts with multiperil coverage in a longitudinal context. Specifically, a two-part model is employed to accommodate the excess of 0s and heavy tails in the insurance loss cost, and a Gaussian copula with a structured correlation is used to capture the dependence within and between perils, as well as their interaction. Using the government property insurance data from the state of Wisconsin in the USA, we show that the multiperil claim model has important implications in both experience rating and risk margin analysis.",

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Multiperil rate making for property insurance using longitudinal data

Abstract

Bibliographical note

Keywords

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