Acta Univ. Agric. Silvic. Mendelianae Brun. 2016, 64(2), 683-689 | DOI: 10.11118/actaun201664020683

Modelling Claim Frequency in Vehicle Insurance

Jiří Valecký

Department of Finance, Faculty of Economics, VŠB-TU Ostrava, Sokolská tř. 33, 701 21 Ostrava, Czech Republic

The paper is focused on modelling claim frequency and extends the work of Kafková and Křivánková, 2014 (Kafková, S., Křivánková, L. 2014. Generalized linear models in vehicle insurance. Acta universitatis agriculturae et silviculturae mendelianae brunensis, 62(2): 383-388). We showed that overdispersion, non-linear systematic component and interacted rating factors should be considered when the claim frequency is modelled. We detected overdispersion in the Poisson model and employed the negative-binomial model to show that considering heterogeneity over insurance policies yields better fit of the model. We also analysed the linear effect of continuous rating factors and their mutual influences. We showed that non-linearity and interactions between rating factors yield the better fit of the model, as well as new findings related to the analysis of claim frequency. All empirical models were estimated on the insurance portfolio of Czech insurance company collected during the years 2004-2008.

Keywords: claim frequency, generalized linear models, heterogeneity, negative-binomial regression, overdispersion, Poisson regression, vehicle insurance

Grants and funding:

This paper was written within the project SP Application of generalized linear models to insurance and finance - Project No. 2015/75 and within the Operational Programme Education for Competitiveness - Project No. CZ.1.07/2.3.00/20.0296.

Prepublished online: May 4, 2016; Published: May 1, 2016  Show citation