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Application of the Markov processes theory in automobile insurance. (English) Zbl 1165.91425

Introduction: The automobile insurance is an important branch of non-life insurance. Considering that an especial feature of automobile insurance is that the companies always adjust their premiums taking into account the past claims history, the bonus-malus system has been widely used in the European and Asian countries as a risk classifiication method. In this work, as an application of Markov process theory in insurance problems, we will show how an automobile insurance problem can be probabilistically modelled through a Markov chain. The work is structured as follows: in section 2, the probability model is formally and intuitively introduced; some illustrative examples are given in section 3 and, finally, a modified bonus-malus model is considered in section 4.

MSC:

91B30 Risk theory, insurance (MSC2010)
62P05 Applications of statistics to actuarial sciences and financial mathematics
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