Making Tweedie's Compound Poisson Model More Accessible
34 Pages Posted: 1 Jul 2020
Date Written: June 8, 2020
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: Suggested Citation