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PREMIUM FORECASTING OF AN INSURANCE COMPANY: AUTOMOBILE INSURANCE

M. EBRAHIM FOULADVAND

Department of Physics, Zanjan University, P. O. Box 45196-313, Zanjan, Iran

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and

AMIR H. DAROONEH

Department of Physics, Zanjan University, P. O. Box 45196-313, Zanjan, Iran

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https://doi.org/10.1142/S0129183105007170Cited by:3 (Source: Crossref)

Abstract

We present an analytical study of an insurance company. We model the company's performance on a statistical basis and evaluate the predicted annual income of the company in terms of insurance parameters namely the premium, the total number of insured, average loss claims etc. We restrict ourselves to a single insurance class the so-called automobile insurance. We show the existence of a crossover premium p_c below which the company is operating at a loss. Above p_c, we also give a detailed statistical analysis of the company's financial status and obtain the predicted profit along with the corresponding risk as well as ruin probability in terms of premium. Furthermore we obtain the optimal premium p_opt which maximizes the company's profit.

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