Heavy-Tailed Loss Frequencies from Mixtures of Negative Binomial and Poisson Counts
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Publication:6416397
arXiv2211.03611MaRDI QIDQ6416397FDOQ6416397
Authors: Jiansheng Dai, Ziheng Huang, Michael R. Powers, Jiaxin Xu 
Publication date: 7 November 2022
Abstract: Heavy-tailed random variables have been used in insurance research to model both loss frequencies and loss severities, with substantially more emphasis on the latter. In the present work, we take a step toward addressing this imbalance by exploring the class of heavy-tailed frequency models formed by continuous mixtures of Negative Binomial and Poisson random variables. We begin by defining the concept of a calibrative family of mixing distributions (each member of which is identifiable from its associated Negative Binomial mixture), and show how to construct such families from only a single member. We then introduce a new heavy-tailed frequency model -- the two-parameter ZY distribution -- as a generalization of both the one-parameter Zeta and Yule distributions, and construct calibrative families for both the new distribution and the heavy-tailed two-parameter Waring distribution. Finally, we pursue natural extensions of both the ZY and Waring families to a unifying, four-parameter heavy-tailed model, providing the foundation for a novel loss-frequency modeling approach to complement conventional GLM analyses. This approach is illustrated by application to a classic set of Swedish commercial motor-vehicle insurance loss data.
Probability distributions: general theory (60E05) Characteristic functions; other transforms (60E10)
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