Bonus–Malus systems with Weibull distributed claim severities

Weihong Ni, Corina Constantinescu, Athanasios A. Pantelous

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One of the pricing strategies for Bonus–Malus (BM) systems relies on the decomposition of the claims’ randomness into one part accounting for claims’ frequency and the other part for claims’ severity. By mixing an exponential with a Lévy distribution, we focus on modelling the claim severity component as a Weibull distribution. For a Negative Binomial number of claims, we employ the Bayesian approach to derive the BM premiums for Weibull severities. We then conclude by comparing our explicit formulas and numerical results with those for Pareto severities that were introduced by Frangos & Vrontos.
Original languageEnglish
Pages (from-to)217-233
Number of pages17
JournalAnnals of Actuarial Science
Issue number2
Publication statusPublished - Sept 2014
Externally publishedYes

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