Determining the Pure Premium at Jasa Raharja Insurance Company Purwakarta Branch using Fast Fourir Transform (FFT) through Estimated Aggregate Loss Distribution

Abstract

Insurance is a contractual agreement between two parties, namely the insured party (customer) and the insurer (insurance company), in which the insured party pays a premium to the insurer, then in return, the insurer will provide compensation (claim) to the insured party if an insured event occurs. Each customer is required to pay apremium as an obligation stated in the insurance agreement by paying a premium, the customer fulfills his obligations and is entitled to the benefits stated in the policy. Therefore, the Insurance Company needs to carry out a scheme in the process of paying pure premiums for the sustainability of the insurance company. When determining the premium, it is done by estimating the aggregate loss distribution. This research will calculate thepure premium at the Purwakarta Branch of Jasa Raharja Insurance Company. The model used in this study is the distribution of aggregate loss with a compound distribution of claim frequency and claim size. Many claims follow the Poisson distribution and large claims follow the Lognormal distribution. In the process of estimating the probability of aggregate loss with the compound distribution model, the Inverse method with the Fast Fourier Transform (FFT) algorithm is used. This research will provide understanding and insight to insurance companies in determining the amount of premium that must be charged to customers.