A Claim Frequency Model of Automobile Insurance Combined with Priori Probabilities and Posteriori Probabilities Methods
Wang Huan-chen · Systems Engineering-Theory Methodology Application · 2005
In traditional pricing of automobile insurance, posteriori probabilities empirical rating is used to construct claim frequency models, this posteriori probabilities method has fault because of the abandonment of priori information. This paper provides a new claim frequency model combined with priori probabilities and posteriori probabilities methods, and uses credibility theory to compare new model with the old model. Finally, the paper provides a computation method and application of this new model. The study shows that, the new claim frequency model not only makes the pricing of automobile insurance more equitable and lowers the pricing risk, but also is easily applied, and its application prospect is nice.