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A financially Balanced Bonus/Malus System

Published online by Cambridge University Press:  29 August 2014

Geert Coene*
Affiliation:
UNISON Consultants Europe E.E.I.G., Brussels, Belgium
Louis G. Doray*
Affiliation:
Department of Mathematics and Statistics, University of Montreal, Montreal, Canada
*
UNISON Consultants Europe E.E.I.G., Avenue Louise 228/7, B-1050 Brussels, Belgium
Department of Mathematics and Statistics, University of Montreal, P.O. Box 6128, Station Centre-ville, Montreal, P.Q., CanadaH3C 3J7
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Abstract

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The premiums for a bonus-malus system which stays in financial equilibrium over the years are calculated. This is done by minimizing a quadratic function of the difference between the premium for an optimal BMS with an infinite number of classes and the premium for a BMS with a finite number of classes, weighted by the stationary probability of being in a certain class, and by imposing various constraints on the system.

Type
Workshop
Copyright
Copyright © International Actuarial Association 1996

References

REFERENCES

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