13 Pages Posted: 7 Jun 2016
Date Written: June 5, 2016
In this paper, we investigate the impact of the claim reporting strategy of drivers, within a bonus malus system. We exhibit the induced modification of the corresponding class level transition matrix and derive the optimal reporting strategy for rational drivers. The hunger for bonuses induces optimal thresholds under which, drivers do not claim their losses. A numerical algorithm is provided for computing such thresholds and realistic numerical applications are discussed.
Keywords: Bonus Malus, Markov Chain, Optimal Control
Suggested Citation: Suggested Citation
Charpentier, Arthur and David, Arthur and Elie, Romuald, Optimal Claiming Strategies in Bonus Malus Systems and Implied Markov Chains (June 5, 2016). Available at SSRN: https://ssrn.com/abstract=2790583