Estimating Claim Occurrences in Non Life Insurance by Using Single Decrement Environment Method

Abstract

Nowadays people are increasingly aware of the importance of financial protection. In insurance companies, there are often a large number of unexpected claims. The purpose of this study is to forecast probability of claim occurrences (conditional failure rate) at certain time interval using existing historical data. To estimate the conditional failure rate, we used single decrement environment. This approach considers only one factor in the calculation process that is the time of the claim. The assumptions used for the time between two claims are exponentially and linearly distributed. The results show that both of linear and exponential assumptions, the probability of claim occurrence in time interval depend on the number of claims and the number of people who had an accident at the interval of observation. Besides that, special for exponential, it depends on the ratio between time interval and the number of days at the interval of observation.