scholarly journals Dynamic Pricing of General Insurance in a Competitive Market

2007 ◽  
Vol 37 (01) ◽  
pp. 1-34 ◽  
Author(s):  
Paul Emms
Keyword(s):  
Dynamic Pricing ◽  
Insurance Premium ◽  
Objective Functions ◽  
Insurance Pricing ◽  
Terminal Wealth ◽  
Optimal Insurance ◽  
General Insurance ◽  
Discounted Utility ◽  
Strategy Changes ◽  
Wealth Generation

A model for general insurance pricing is developed which represents a stochastic generalisation of the discrete model proposed by Taylor (1986). This model determines the insurance premium based both on the breakeven premium and the competing premiums offered by the rest of the insurance market. The optimal premium is determined using stochastic optimal control theory for two objective functions in order to examine how the optimal premium strategy changes with the insurer’s objective. Each of these problems can be formulated in terms of a multi-dimensional Bellman equation. In the first problem the optimal insurance premium is calculated when the insurer maximises its expected terminal wealth. In the second, the premium is found if the insurer maximises the expected total discounted utility of wealth where the utility function is nonlinear in the wealth. The solution to both these problems is built-up from simpler optimisation problems. For the terminal wealth problem with constant loss-ratio the optimal premium strategy can be found analytically. For the total wealth problem the optimal relative premium is found to increase with the insurer’s risk aversion which leads to reduced market exposure and lower overall wealth generation.

scholarly journals Dynamic Pricing of General Insurance in a Competitive Market

2007 ◽  
Vol 37 (1) ◽  
pp. 1-34 ◽  
Author(s):  
Paul Emms
Keyword(s):  
Dynamic Pricing ◽  
Insurance Premium ◽  
Objective Functions ◽  
Insurance Pricing ◽  
Terminal Wealth ◽  
Optimal Insurance ◽  
General Insurance ◽  
Discounted Utility ◽  
Strategy Changes ◽  
Wealth Generation

A model for general insurance pricing is developed which represents a stochastic generalisation of the discrete model proposed by Taylor (1986). This model determines the insurance premium based both on the breakeven premium and the competing premiums offered by the rest of the insurance market. The optimal premium is determined using stochastic optimal control theory for two objective functions in order to examine how the optimal premium strategy changes with the insurer’s objective. Each of these problems can be formulated in terms of a multi-dimensional Bellman equation.In the first problem the optimal insurance premium is calculated when the insurer maximises its expected terminal wealth. In the second, the premium is found if the insurer maximises the expected total discounted utility of wealth where the utility function is nonlinear in the wealth. The solution to both these problems is built-up from simpler optimisation problems. For the terminal wealth problem with constant loss-ratio the optimal premium strategy can be found analytically. For the total wealth problem the optimal relative premium is found to increase with the insurer’s risk aversion which leads to reduced market exposure and lower overall wealth generation.

scholarly journals Fair Insurance Premium Rate in Connected SEIR Model under Epidemic Outbreak

2021 ◽  
Author(s):  
Alexey Chernov ◽  
Aleksandr Shemendyuk ◽  
Mark Kelbert
Keyword(s):  
Equivalence Principle ◽  
Initial Distribution ◽  
Insurance Premium ◽  
Epidemic Outbreak ◽  
Migration Rates ◽  
Optimal Insurance ◽  
Premium Rate ◽  
Simple Set ◽  
Insurance Costs ◽  
Set Up

In this paper, we aim to determine an optimal insurance premium rate for health-care in deterministic and stochastic SEIR models. The studied models consider two standard SEIR centres characterised by migration fluxes and vaccination of population. The premium is calculated using the basic equivalence principle. Even in this simple set-up, there are non-intuitive results that illustrate how the premium depends on migration rates, the severity of a disease and the initial distribution of healthy and infected individuals through the centres. We investigate how the vaccination program affects the insurance costs by comparing the savings in benefits with the expenses for vaccination. We compare the results of deterministic and stochastic models.

Optimal Insurance-Package and Investment Problem for an Insurer

2018 ◽  
Vol 6 (1) ◽  
pp. 85-96
Author(s):  
Delei Sheng ◽  
Linfang Xing
Keyword(s):  
Value Function ◽  
Investment Strategy ◽  
Optimal Combination ◽  
Hjb Equations ◽  
Terminal Wealth ◽  
Optimal Insurance ◽  
Yield Rate ◽  
Investment Problem ◽  
Hamilton Jacobi Bellman ◽  
The Value Function

AbstractAn insurance-package is a combination being tie-in at least two different categories of insurances with different underwriting-yield-rate. In this paper, the optimal insurance-package and investment problem is investigated by maximizing the insurer’s exponential utility of terminal wealth to find the optimal combination-share and investment strategy. Using the methods of stochastic analysis and stochastic optimal control, the Hamilton-Jacobi-Bellman (HJB) equations are established, the optimal strategy and the value function are obtained in closed form. By comparing with classical results, it shows that the insurance-package can enhance the utility of terminal wealth, meanwhile, reduce the insurer’s claim risk.

scholarly journals IMPLEMENTASI METODE BAYES PADA PENGHITUNGAN PREMI ASURANSI KENDARAAN BERMOTOR

2020 ◽  
Vol 3 (2) ◽  
pp. 112-123
Author(s):  
Rika Fitriani ◽  
Gunardi Gunardi
Keyword(s):  
Historical Data ◽  
Motor Vehicle ◽  
Insurance Premium ◽  
Insurance Companies ◽  
Bayes Method ◽  
General Insurance ◽  
Pure Premium ◽  
Historical Data Analysis ◽  
Claim Frequency ◽  
Motor Vehicle Insurance

One type of general insurance is motor vehicle insurance. Premium pricing of general insurance can be calculated by some methods. In this study, Bayes method will be used. The distribution of claim frequency is Poisson distribution and the distribution of claim severity is Exponential distribution. The premium is calculated by multiplying the expectation of claim frequency and the expectation of claim severity. Based on the historical data analysis using the Bayes method, the highest pure premium of motor vehicle insurance in Indonesia is Hino brand and the lowest pure premium is Honda brand. The result of this premium pricing can be used as a reference for the insurance companies to manage their motor vehicle insurance reserves.

The pricing of loan insurance based on the Gram-Charlier option model

2018 ◽  
Vol 8 (4) ◽  
pp. 425-440 ◽  
Author(s):  
Yaojie Zhang ◽  
Yu Wei ◽  
Benshan Shi
Keyword(s):  
Iterative Method ◽  
Empirical Evidence ◽  
Closed Form Solution ◽  
Asset Returns ◽  
Insurance Premium ◽  
Pricing Model ◽  
Practical Application ◽  
Content Type ◽  
Insurance Pricing ◽  
Skewness And Kurtosis

PurposeThe purpose of this paper is to develop a loan insurance pricing model allowing for the skewness and kurtosis existing in underlying asset returns.Design/methodology/approachUsing the theory of Gram-Charlier option, the authors first derive a closed-form solution of the Gram-Charlier pricing model. To address the difficulties in implementing the pricing model, the authors subsequently propose an iterative method to estimate skewness and kurtosis in practical application, which shows a relatively fast convergence rate in the empirical test.FindingsNot only the theoretical analysis but also the empirical evidence shows that the effects of skewness and kurtosis on loan insurance premium tend to be negative and positive, respectively. Furthermore, the actual values of skewness and kurtosis are usually negative and positive, respectively, which leads to the empirical result that the pricing model ignoring skewness and kurtosis substantially underestimates loan insurance premium.Originality/valueThis paper proposes a loan insurance pricing model considering the skewness and kurtosis of asset returns, in which the authors use the theory of Gram-Charlier option. More importantly, the authors further propose a novel iterative method to estimate skewness and kurtosis in practical application. The empirical evidence suggests that the Gram-Charlier pricing model captures the information content of skewness and kurtosis.

scholarly journals Operational Efficiency of Selected General Insurance Companies in India

2019 ◽  
Vol 9 (2) ◽  
pp. 4899-4902
Keyword(s):  
Public Sector ◽  
Life Insurance ◽  
Private Insurance ◽  
Insurance Premium ◽  
The Other ◽  
Third Party ◽  
Insurance Companies ◽  
Insurance Policies ◽  
General Insurance ◽  
To Come

Life is full of risks and uncertainties. In fact risk is everywhere. Even when you ride a bike to the nearest shop in the street, there is a risk. One must protect himself or herself from this risk. The solution is insurance. Broadly it is two types i.e. life insurance and non-life insurance (general insurance). In this paper we discuss about only general insurance. General insurance helps in securing ourselves and things we value like homes, cars, bikes or any other property from any kind of mishap whether it is big or small. General insurance protect insured property from fire accidents, floods, earthquakes, storms, thefts, travel accidents/mishaps or any other kind of calamity, even from the cost incurred against us from legal action depending upon the type of policy selected by the insurer. From the post liberalization scenario, general insurance in India is growing rapidly. The reasons behind its spectacular growth are allowing private companies to enter into Indian market, low insurance premium, TPAs (Third Party Administrators), Fast and immediate settlement of insurance claims, Innovative general insurance policies, discounts in insurance products, increasing awareness among people, more distribution channels etc. The other side of the coin is, public sector insurance companies are facing cut throat completion from private insurance companies as they offer wide variety of policies at a low premium. Due to this few general insurance companies are closed and few are forced to come out with same polices and services. Ultimately the performance of public sector general insurance companies also enhanced with the competitive moves by private players. On the other hand, customers are also exposed to new trends in the insurance market. Insurance Regulatory and Development Authority (IRDA) is the apex body in India to monitor the activities of insurance companies. It has laid down standard terms and conditions to general insurance companies and also given scope for personal accidental life insurance policies. IRDA has taken all the measures to improve the performance of general insurance companies as it is one of the fast growing areas in Indian economy.

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