Using Mixed Poisson Processes in Connection with Bonus-Malus Systems

Abstract

For the construction of bonus-malus systems, we propose to show how to apply, thanks to simple mathematics, a parametric method encompassing those encountered in the literature. We also compare this parametric method with a non-parametric one that has not yet been used in the actuarial literature and that however permits a simple formulation of the stationary and transition probabilities in a portfolio whenever we have the intention to construct a bonus-malus system with finite number of classes.