THE BONUS-MALUS SYSTEM MODELLING USING THE TRANSITION MATRIX

Abstract

The motor insurance is an important branch of non-life insurance in many countries; in some of them, coming first in total premium income category (in Romania, for example). The Bonus-Malus system implementation is one of the solutions chosen by the insurance companies in order to increase the efficiency in the motor insurance domain. This system has been recently introduced by the Romanian insurers as well. In this paper I present the means for modelling the bonus-malus system using the transition matrix.

Keywords

• Bonus-Malus
• system
• Romanian Bonus-Malus system
• transition matrix
• motor insurance