Determination of multiple period credibility premium on Bühlmann credibility model

H. Lazuardi, S. Nurrohmah, I. Fithriani

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Bühlmann credibility model generally used to predict premium tariff for each policyholder at (n+1)-th period based on n periods historical claims or also called one period model. In this paper, Bühlmann credibility model will able to predict more than one period or also called multiple period model. Multiple period model allows insurer to predict amount of premium not only one period ahead but also few periods ahead based on n periods historical claims. The model considers two important components, which are future claim and anticipating premium by giving weight for each component. To minimize the difference between multiple period premium and future claim also between multiple period premium and anticipating premium, quadratic programming problem is used on this paper. Quadratic programming problem is solved by Karush-Kuhn-Tucker conditions. By applying the concept of multiple period models to real data, it can be seen that the Bühlmann multiple period credibility model gives premiums more fair for each policyholder than using the one-period credibility model. By using this model, hopefully insurer enables to conduct long-term financial planning and increases effectiveness of work.

Original languageEnglish
Title of host publicationProceedings of the 5th International Symposium on Current Progress in Mathematics and Sciences, ISCPMS 2019
EditorsTerry Mart, Djoko Triyono, Tribidasari Anggraningrum Ivandini
PublisherAmerican Institute of Physics Inc.
ISBN (Electronic)9780735420014
DOIs
Publication statusPublished - 1 Jun 2020
Event5th International Symposium on Current Progress in Mathematics and Sciences, ISCPMS 2019 - Depok, Indonesia
Duration: 9 Jul 201910 Jul 2019

Publication series

NameAIP Conference Proceedings
Volume2242
ISSN (Print)0094-243X
ISSN (Electronic)1551-7616

Conference

Conference5th International Symposium on Current Progress in Mathematics and Sciences, ISCPMS 2019
CountryIndonesia
CityDepok
Period9/07/1910/07/19

Keywords

  • Anticipating premium
  • Bühlmann credibility model
  • future claim
  • multiple period
  • quadratic programming problem

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  • Cite this

    Lazuardi, H., Nurrohmah, S., & Fithriani, I. (2020). Determination of multiple period credibility premium on Bühlmann credibility model. In T. Mart, D. Triyono, & T. A. Ivandini (Eds.), Proceedings of the 5th International Symposium on Current Progress in Mathematics and Sciences, ISCPMS 2019 [030030] (AIP Conference Proceedings; Vol. 2242). American Institute of Physics Inc.. https://doi.org/10.1063/5.0007955