Abstract
A Bonus-Malus system (BMS) is one of the types of experience ratemaking methods in automobile insurance in which the future premiums are adjusted according to the insured’s claim history. Usually it is assumed the considered portfolio for designing a BMS is closed, where the policyholders only have movement between specified classes in the portfolio without any assumption about their exit. In many applications, however, this assumption doesn’t hold, which means a policyholder in every class may prefer to leave the portfolio. In this situation we have a BMS in open portfolio. Certainly, ignoring this issue can result in unrealistic conclusions. This issue will need to be looked at more closely, in particular, in the deregulated markets, where each insurer is free to design its own BMS. The problem is open in general, although some results have been produced over the last decade. This chapter provides an overview of the importance of considering open portfolios in insurance markets and explores the challenges involved in designing and evaluating BMSs in open portfolios. KeywordsBonus-malus System (BMS)PolicyholdersOpen PortfolioRatemaking MethodsFrequent ClaimsThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
