Setting the optimal limit value of motor insurance coverage by stochastic optimization

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F18%3A10239543" target="_blank" >RIV/61989100:27510/18:10239543 - isvavai.cz</a>

Result on the web

<a href="http://dx.doi.org/10.7327/cerei.2018.03.01" target="_blank" >http://dx.doi.org/10.7327/cerei.2018.03.01</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.7327/cerei.2018.03.01" target="_blank" >10.7327/cerei.2018.03.01</a>

Result language

angličtina

Original language name

Setting the optimal limit value of motor insurance coverage by stochastic optimization

Original language description

In this paper, we provide an alternative to a passive approach to the selection of insurance products or policy con-ditions. Specifically, we propose a method to make a decision about the optimal limit value for motor insurance coverage. Respecting the stochastic nature of individual loss, we formulate a problem of stochastic programming in which the total potential financial loss of the policyholder is minimized. Actually, we present a general optimization problem in which various relevant probability distributions of individual loss may be considered. In addition, we extend the work of Valecký (2017) and derive an insurance rate that describes better the dependence between the pure premium and the given limit value under the assumption that the individual potential loss follows a gamma distribution. Because of the absence of a closed-form solution, sample average approximation is applied to the objective function and the optimal solution to this approximated (SAA) problem is determined. Finally, the quality of the obtained solution is assessed by approximation to the optimality gap representing the difference between our candidate and the true solution.

Czech name

—

Czech description

—

Type

J_ost - Miscellaneous article in a specialist periodical

CEP classification

—

OECD FORD branch

50202 - Applied Economics, Econometrics

Project

<a href="/en/project/EE2.3.20.0296" target="_blank" >EE2.3.20.0296: Research team for modelling of economic and financial processes at VSB-TU Ostrava</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)<br>S - Specificky vyzkum na vysokych skolach

Publication year

2018

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Ekonomická revue

ISSN

1212-3951

e-ISSN

—

Volume of the periodical

21

Issue of the periodical within the volume

1

Country of publishing house

CZ - CZECH REPUBLIC

Number of pages

8

Pages from-to

5-12

UT code for WoS article

—

EID of the result in the Scopus database

—