Credibility theory based on trimming
The classical credibility theory proposed by Bühlmann has been widely used in general insurance applications. In this paper we propose a credibility theory via truncation of the loss data, or the trimmed mean. The proposed framework contains the classical credibility theory as a special case and is...
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| Veröffentlicht in: | Insurance, mathematics & economics mathematics & economics, 2013-07, Vol.53 (1), p.36-47 |
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| container_title | Insurance, mathematics & economics |
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| creator | Kim, Joseph H.T. Jeon, Yongho |
| description | The classical credibility theory proposed by Bühlmann has been widely used in general insurance applications. In this paper we propose a credibility theory via truncation of the loss data, or the trimmed mean. The proposed framework contains the classical credibility theory as a special case and is based on the idea of varying the trimming threshold level to investigate the sensitivity of the credibility premium. After showing that the trimmed mean is not a coherent risk measure, we investigate some related asymptotic properties of the structural parameters in credibility. Later a numerical illustration shows that the proposed credibility models can successfully capture the tail risk of the underlying loss model, thus providing a better landscape of the overall risk that insurers assume.
•In this paper we propose a credibility theory via truncation of the loss data.•The proposed framework contains the classical credibility theory as a special case.•It is shown that the trimmed mean is not a coherent risk measure.•Some related asymptotic properties are established.•A numerical illustration is provided. |
| doi_str_mv | 10.1016/j.insmatheco.2013.03.012 |
| format | Article |
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| language | eng |
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| source | Access via ScienceDirect (Elsevier) |
| subjects | Actuarial science Asymptotic methods Credibility Economic models Financial risks Insurance Insurance applications Insurance premiums L-estimator Losses Numerical analysis Risk assessment Risk measure Risk theory Statistical models Structural analysis Studies Trimmed mean |
| title | Credibility theory based on trimming |
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