Sample Size Determination for Credibility Estimation
17 Pages Posted: 20 Nov 2020 Last revised: 4 Nov 2021
Date Written: October 10, 2020
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: Suggested Citation