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Risks 2016, 4(1), 6; doi:10.3390/risks4010006

Analysis of Insurance Claim Settlement Process with Markovian Arrival Processes

Department of Statistical and Actuarial Sciences, University ofWestern Ontario, London, ON N5X 0B3, Canada
Academic Editor: Montserrat Guillén
Received: 8 December 2015 / Revised: 3 February 2016 / Accepted: 7 March 2016 / Published: 11 March 2016
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Abstract

This paper proposes a model for the claim occurrence, reporting, and handling process of insurance companies. It is assumed that insurance claims occur according to a Markovian arrival process. An incurred claim goes through some stages of a claim reporting and handling process, such as Incurred But Not Reported (IBNR), Reported But Not Settled (RBNS) and Settled (S). We derive formulas for the joint distribution and the joint moments for the amount of INBR, RBNS and Settled claims. This model generalizes previous ones in the literature, which generally assume Poisson claim arrivals. Due to the flexibility of the Markovian arrival process, the model can be used to evaluate how the claim occurring, reporting, and handling mechanisms may affect the volatilities of the amount of IBNR, RBNS and Settled claims, and the interdependencies among them. View Full-Text
Keywords: Incurred But Not Reported (IBNR) losses; Markovian Arrival Processes Incurred But Not Reported (IBNR) losses; Markovian Arrival Processes
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Ren, J. Analysis of Insurance Claim Settlement Process with Markovian Arrival Processes. Risks 2016, 4, 6.

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