Policy Decision Making and Management Effectiveness: Avoiding the Risk of Credibility Premium Goof

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Policy Decision Making and Management Effectiveness: Avoiding the Risk of Credibility Premium Goof

Journal Title: Scholars Bulletin - Year 2017, Vol 3, Issue 12

Abstract

Abstract:This article reports on estimating credibility factor using Empirical Bayes Credibility Theory. The credibility factor determined will help insurance companies to determine accurate credibility premium in order to charge aggregate premium that is reasonable in the coming year per risk using credibility premium formula. Thirteen risks/portfolios, from the Metropolitan Insurance Company, Ghana were used for the study. Among other things, the study results reveal that the distribution of all number of claims follows poisson distribution.. The study indicates that motto comprehensive, third party, workman compensation, fire material damage and asset risk had the highest credibility factors (Z_i>0.5) showing reliance on expected individual aggregate claims X ̅_i and those with credibility factors (Z_i<0.5) indicating reliance onriskparameter of overall risk E[m(θ)] or ExpecteAbstract:This article reports on estimating credibility factor using Empirical Bayes Credibility Theory. The credibility factor determined will help insurance companies to determine accurate credibility premium in order to charge aggregate premium that is reasonable in the coming year per risk using credibility premium formula. Thirteen risks/portfolios, from the Metropolitan Insurance Company, Ghana were used for the study. Among other things, the study results reveal that the distribution of all number of claims follows poisson distribution.. The study indicates that motto comprehensive, third party, workman compensation, fire material damage and asset risk had the highest credibility factors (Z_i>0.5) showing reliance on expected individual aggregate claims X ̅_i and those with credibility factors (Z_i<0.5) indicating reliance onriskparameter of overall risk E[m(θ)] or Expected Aggregate Claims. The results further indicate that expected range of volume of business in the coming years for all risks/portfolios was estimatedas (V_B±t_(α/2) s/(√n)) and the empirical bayes credibility theory premium was R_p×(V_B±t_(α/2) s/(√n)). Keywords:policy decisions, management effectiveness, credibility premium, credibility factor, Empirical Bayes credibility Theory; insolvency d Aggregate Claims. The results further indicate that expected range of volume of business in the coming years for all risks/portfolios was estimatedas (V_B±t_(α/2) s/(√n)) and the empirical bayes credibility theory premium was R_p×(V_B±t_(α/2) s/(√n)). Keywords:policy decisions, management effectiveness, credibility premium, credibility factor, Empirical Bayes credibility Theory; insolvency

Authors and Affiliations

Iddrisu Abubakari, Paa-Grant Rexford, Zakari Abubakari, Ernestina Linda Bonny

Keywords

policy decisions management effectiveness credibility premium credibility factor Empirical Bayes credibility Theory; insolvency d Aggregate Claims. The results further indicate that expected range of volume of business in the coming years for all risks/portfolios was estimatedas (V_B±t_(α/2) s/(√n)) and the empirical bayes credibility theory premium was R_p×(V_B±t_(α/2) s/(√n)). Keywords:policy decisions management effectiveness credibility premium credibility factor Empirical Bayes credibility Theory; insolvency

EP ID EP382892
DOI -
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