Determining Pure Premium of Motor Vehicle Insurance with Generalized Linear Models (GLM)

Tyrenia Rahmawati, Dwi Susanti, Riaman Riaman

Abstract


Motor vehicle insurance guarantees protection, coverage, and compensation for the risks of accidents, damages, and loss of motor vehicles. It is crucial for companies to determine appropriate insurance premium rates as a preventive measure to avoid difficulties in meeting claims filed by policyholders. This research aims to determine the pure premium of motor vehicle insurance using the Generalized Linear Models (GLM) method, which utilizes the concept of a general linear relationship between independent variables and the dependent/response variable, as well as identifying motor vehicle characteristics that influence the determination of pure premiums. The data used in this study is from Swedish motor vehicle insurance. The research aims to determine the pure premium in the data by modeling claim frequency using the Poisson distribution and claim severity using the Gamma distribution, depending on the significantly influential characteristics. The Maximum Likelihood Estimation method is employed for parameter estimation. After conducting the research, the estimated parameters , , and the pure premium of motor vehicle insurance are found to be 35,572,223.27 kr, with the characteristics influencing the pure premium being the distance traveled by the vehicle, the insured's geographic zone, and the no-claim bonus.


Keywords


Motor vehicle insurance; pure premium; Poisson distribution; Gamma distribution; claim frequency; claim amount; Generalized Linear Models; Maximum Likelihood

Full Text:

PDF

References


Annette J., D., & Barnett, A. G. (2008). An introduction to generalized linear models (3rd ed.). CRC Press.

David, M. (2015). Auto Insurance Premium Calculation Using Generalized Linear Models. Procedia Economics and Finance, 20, 147–156.

Hardin, J., & Joseph, H. (2007). Generalized Linear Models and Extensions, 2nd Edition, Stata Press.

Jong, P., & Heller, G. (2008). Generalized Linear Models for Insurance Data.

Kafková, S., & Krivánková, L. (2014). Generalized linear models in vehicle insurance. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 62(2), 383–388.

McCullagh, P., & Nelder, J. A. (2019). Generalized Linear Models. Routledge.

McCulloch, Searle, & Neuhaus. (2011). Generalized, Linear, and Mixed Models, 2nd Edition (Second). Wiley.

Putra, T. A. J., Lesmana, D. C., & Purnaba, I. G. P. (2021). Penghitungan Premi Asuransi Kendaraan Bermotor Menggunakan Generalized Linear Models dengan Distribusi Tweedie. Jambura Journal of Mathematics, 3(2), 115–127.

Suwardi, D. A., & Purwono, Y. (2021). The Analysis of Motor Vehicle Insurance Claim Reserve Using Robust Chain Ladder.

Wuthrich, M., & Merz, M. (2012). Stochastic Claims Reserving Methods in Insurance. Wiley.




DOI: https://doi.org/10.46336/ijqrm.v4i4.492

Refbacks

  • There are currently no refbacks.


Copyright (c) 2023 Tyrenia Rahmawati, Dwi Susanti, Riaman Riaman

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Published By: 

IJQRM: Jalan Riung Ampuh No. 3, Riung Bandung, Kota Bandung 40295, Jawa Barat, Indonesia

 

IJQRM Indexed By: 

width= width= width= width= width= width= 

 


Lisensi Creative Commons Creation is distributed below Lisensi Creative Commons Atribusi 4.0 Internasional.


View My Stats