Sample Size Determination for Credibility Estimation

17 Pages Posted: 20 Nov 2020 Last revised: 4 Nov 2021

See all articles by Liang Hong

Liang Hong

The University of Texas at Dallas

Date Written: October 10, 2020

Abstract

The credibility estimator has been successfully and widely applied by practitioners in the insurance industry for decades. However, an important issue remains unresolved: what sample size should the actuary choose when he/she applies the credibility estimator? In particular, is the size of a given claims data set large enough for the credibility estimator to be accurate? This paper aims to address this issue by first suggesting a sample size criterion for the credibility estimator and then proposing a sample size based upon that. The proposed sample size is easy to apply, and it guarantees provable accuracy for credibility estimation.

Keywords: Bayesian analysis; credibility theory; experience rating; predictive modeling; sample size criterion

JEL Classification: G22

Suggested Citation

Hong, Liang, Sample Size Determination for Credibility Estimation (October 10, 2020). Available at SSRN: https://ssrn.com/abstract=3709108 or http://dx.doi.org/10.2139/ssrn.3709108

Liang Hong (Contact Author)

The University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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