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Risks 2017, 5(4), 58; doi:10.3390/risks5040058

Optimal Claiming Strategies in Bonus Malus Systems and Implied Markov Chains

Faculte des Sciences Economiques, Universite Rennes 1, 7 Place Hoche, 35065 Rennes CEDEX, France
Batiment Bois de l’Etang, Universite Paris Est, 5 rue Galilee, 77420 Champs sur Marne, France
Author to whom correspondence should be addressed.
Received: 28 April 2017 / Revised: 22 September 2017 / Accepted: 23 October 2017 / Published: 8 November 2017
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In this paper, we investigate the impact of the accident reporting strategy of drivers, within a Bonus-Malus system. We exhibit the induced modification of the corresponding class level transition matrix and derive the optimal reporting strategy for rational drivers. The hunger for bonuses induces optimal thresholds under which, drivers do not claim their losses. Mathematical properties of the induced level class process are studied. A convergent numerical algorithm is provided for computing such thresholds and realistic numerical applications are discussed. View Full-Text
Keywords: bonus hunger; bonus-malus; control; incentives; Markov Chains; reporting bonus hunger; bonus-malus; control; incentives; Markov Chains; reporting

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Charpentier, A.; David, A.; Elie, R. Optimal Claiming Strategies in Bonus Malus Systems and Implied Markov Chains. Risks 2017, 5, 58.

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