Research projects

Project CEMAPRE internal

TitlePricing automobile insurance and the effects of technology advancement estimation
ParticipantsRenata Alcoforado, Agnieszka Bergel, Corina Constantinescu, Alfredo Egídio dos Reis (Principal Investigator), Véronique Maume-Deschamps, Weihong Ni, Eugenio Rodriguez Martinez
SummaryWith a focus in the context of automobile insurance, this project would like to look at the current
status of insurance industry in terms of new uncertainties and dependence between claim frequency
and size. By new uncertainties we mean identified issues brought by recent
technology developments. On the one hand, we try to start from a neutral perspective against the
uncertainties embedded with unfamiliar/innovative policies. By making dynamic adjustment of premiums
based upon claim records stemming from these policies thanks to the features in a Bonus-Malus System
(BMS), we believe the model not only promotes an initial competitive market position for an insurer
but also ensures the control of the risks. On the other hand, there are several identified issues
related to recent technology advancement that have affected people's
driving behaviours, e.g. the use of mobile phones according to the U.S. Department of
Transportation. To quantitatively evaluate risks associated with a certain human habit is believed
to facilitate an insurer's risk management strategies as well as pricing an insurance product and
that will be the second concentration in this proposed project. We use a Bayesian perspective to
explain the introduction of unforeseeable risks and develop it in order to allow dependence to be
captured "naturally". We refer to our 2017 pricing automobile insurance Cemapre internal project as
this is its continuation.