Making Tweedie's Compound Poisson Model More Accessible

34 Pages Posted: 1 Jul 2020

See all articles by Lukasz Delong

Lukasz Delong

Warsaw School of Economics (SGH) - Institute of Econometrics

Mathias Lindholm

Stockholm University

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: June 8, 2020

Abstract

The most commonly used regression model in general insurance pricing is the compound Poisson model with gamma claim sizes. There are two different parametrizations for this model: the Poisson-gamma parametrization and Tweedie's compound Poisson parametrization. Insurance industry typically prefers the Poisson-gamma parametrization. We review both parametrizations, provide new results that help to lower computational costs for Tweedie's compound Poisson parameter estimation within generalized linear models, and we provide evidence supporting the industry preference for the Poisson-gamma parametrization.

Keywords: compound Poisson model, gamma claim sizes, Tweedie's distribution, exponential dispersion family, generalized linear models, neural network

JEL Classification: G22, C13, C53, C45

Suggested Citation

Delong, Lukasz and Lindholm, Mathias and Wuthrich, Mario V., Making Tweedie's Compound Poisson Model More Accessible (June 8, 2020). Available at SSRN: https://ssrn.com/abstract=3622871 or http://dx.doi.org/10.2139/ssrn.3622871

Lukasz Delong

Warsaw School of Economics (SGH) - Institute of Econometrics ( email )

Niepodleglosci 164
Warsaw, 02-554
Poland

Mathias Lindholm

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Mario V. Wuthrich (Contact Author)

RiskLab, ETH Zurich ( email )

Department of Mathematics
Ramistrasse 101
Zurich, 8092
Switzerland

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