Vehicle and Fleet Random Effects in a Model of Insurance Rating for Fleets of Vehicles

67 Pages Posted: 13 Oct 2004

See all articles by Georges Dionne

Georges Dionne

HEC Montreal - Department of Finance

Jean-François Angers

University of Montreal - Center for Research on Transportation

Denise Desjardins

University of Montreal - Center for Research on Transportation

François Guertin

University of Montreal - Center for Research on Transportation

Date Written: September 28, 2005

Abstract

We are proposing a parametric model to rate insurance for vehicles belonging to a fleet. The tables of premiums presented take into account past vehicle accidents, observable characteristics of the vehicles and fleets, and violations of the road-safety code committed by drivers and carriers. The premiums are also adjusted according to accidents accumulated by the fleets over time. The proposed model accounts directly for explicit changes in the various components of the probability of accidents. It represents an extension of bonus malus-type automobile insurance models for individual premiums (Lemaire, 1985; Dionne and Vanasse, 1989 and 1992; Pinquet, 1997 and 1998; Frangos and Vrontos, 2001; Purcaru and Denuit, 2003). The extension adds a fleet effect to the vehicle effect so as to account for the impact that the unobservable characteristics or actions of carriers can have on truck accident rates. This form of rating makes it possible to visualize what impact the behaviors of owners and drivers can have on the predicted rate of accidents and, consequently, on premiums. The results are compared to those of the semiparametric approach.

Keywords: Fleet of vehicles, random effects, vehicle effect, fleet effect, insurance rating, behaviors of owners and drivers, Poisson, gamma, Dirichlet, parametric model

JEL Classification: C35, C51, G22

Suggested Citation

Dionne, Georges and Angers, Jean-François and Desjardins, Denise and Guertin, François, Vehicle and Fleet Random Effects in a Model of Insurance Rating for Fleets of Vehicles (September 28, 2005). Available at SSRN: https://ssrn.com/abstract=601801 or http://dx.doi.org/10.2139/ssrn.601801

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

Jean-François Angers

University of Montreal - Center for Research on Transportation ( email )

C.P. 6128, Succ. Centre-Ville
Montreal, Quebec H3C 3J7
Canada

Denise Desjardins

University of Montreal - Center for Research on Transportation ( email )

C.P. 6128, Succ. Centre-Ville
Montreal, Quebec H3C 3J7
Canada

François Guertin

University of Montreal - Center for Research on Transportation ( email )

C.P. 6128, Succ. Centre-Ville
Montreal, Quebec H3C 3J7
Canada

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