Calculating Premium Credibility Using the Buhlmann-Straub Modelwith Nonparametric Assessment

Dwi Susanti, Sokono Sukono

Abstract


When an insurance company calculates the premium it will divides the policy holders into groups. The division is considered based on risk level in each group. The problem is then to devise a way of combining the experience risk of the group with the experience of the individual risk to calculate the premium, so then Credibility Theory provides a solution to this problem.This script discuss about calculation of credibility premium use Buhlmann-Straub Model with nonparametric estimation to the aggregate claim amount data set within few years observation in some group of policy holders in  general insurance. By using credibility theory we can calculate the value of credibility factor and credibility premium or future premium. The value of premium credibility is calculated from only one group of policyholders from the previous year's data. For better value of premium credibility, data with more experience years and the policyholder group better reflect the total loss value during the observation year.The result of this calculation are credibility factor per group, average credibility premium per members in group and credibility premium total for the last year for each group. We can obtain total losses and total premium which surprisingly equal.

 


Keywords


Buhlmann-Straub Model, Credibility Theory, Credibility Premium, General Insurance, Aggregate Claim Amount.

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DOI: https://doi.org/10.47194/ijgor.v1i1.15

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