Regression for copula-linked compound distributions with applications in modeling aggregate insurance claims
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Publication:2179972
DOI10.1214/19-AOAS1299zbMATH Open1439.62247arXiv1910.05676MaRDI QIDQ2179972FDOQ2179972
Authors: Peng Shi, Zifeng Zhao 
Publication date: 13 May 2020
Published in: The Annals of Applied Statistics (Search for Journal in Brave)
Abstract: In actuarial research, a task of particular interest and importance is to predict the loss cost for individual risks so that informative decisions are made in various insurance operations such as underwriting, ratemaking, and capital management. The loss cost is typically viewed to follow a compound distribution where the summation of the severity variables is stopped by the frequency variable. A challenging issue in modeling such outcome is to accommodate the potential dependence between the number of claims and the size of each individual claim. In this article, we introduce a novel regression framework for compound distributions that uses a copula to accommodate the association between the frequency and the severity variables, and thus allows for arbitrary dependence between the two components. We further show that the new model is very flexible and is easily modified to account for incomplete data due to censoring or truncation. The flexibility of the proposed model is illustrated using both simulated and real data sets. In the analysis of granular claims data from property insurance, we find substantive negative relationship between the number and the size of insurance claims. In addition, we demonstrate that ignoring the frequency-severity association could lead to biased decision-making in insurance operations.
Full work available at URL: https://arxiv.org/abs/1910.05676
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General nonlinear regression (62J02) Applications of statistics to economics (62P20) Characterization and structure theory for multivariate probability distributions; copulas (62H05) Missing data (62D10)
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Cited In (18)
- A mixed copula model for insurance claims and claim sizes
- A copula transformation in multivariate mixed discrete-continuous models
- An improved copula regression model based on auto insurance data
- Rank-based inference tools for copula regression, with property and casualty insurance applications
- Regression for copula-linked compound distributions with applications in modeling aggregate insurance claims
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- Phase-type distributions for claim severity regression modeling
- Dependence modeling of frequency-severity of insurance claims using waiting time
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- A multivariate frequency-severity framework for healthcare data breaches
- Deep quantile and deep composite triplet regression
- Copula credibility for aggregate loss models
- Copula Regression for Compound Distributions with Endogenous Covariates with Applications in Insurance Deductible Pricing
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