Assessing the performance of the discrete generalised Pareto distribution in modelling non-life insurance claims
type: Item
instance of: scholarly article
title: Assessing the performance of the discrete generalised Pareto distribution in modelling non-life insurance claims
zbMATH Open document ID: 1471.62525
DOI: 10.1155/2021/5518583
author: S. K.-B. Dzidzornu
author: R. Minkah
published in: Journal of Probability and Statistics
publication date: 2021-08-26T00:00:00Z
full work available at URL: https://arxiv.org/abs/2004.06150
review text: Summary: The generalised Pareto distribution (GPD) offers a family of probability spaces which support threshold exceedances and is thus suitable for modelling high-end actuarial risks. Nonetheless, its distributional continuity presents a critical limitation in characterising data of discrete forms. Discretising the GPD, therefore, yields a derived distribution which accommodates the count data while maintaining the essential tail modelling properties of the GPD. In this paper, we model non-life insurance claims under the three-parameter discrete generalised Pareto (DGP) distribution. Data for the study on reported and settled claims, spanning the period 2012--2016, were obtained from the National Insurance Commission, Ghana. The maximum likelihood estimation (MLE) principle was adopted in fitting the DGP to yearly and aggregated data. The estimation involved two steps. First, we propose a modification to the \(\mu\) and \((\mu + 1)\) frequency method in the literature. The proposal provides an alternative routine for generating initial estimators for MLE, in cases of varied count intervals, as is a characteristic of the claim data under study. Second, a bootstrap algorithm is implemented to obtain standard errors of estimators of the DGP parameters. The performance of the DGP is compared to the negative binomial distribution in modelling the claim data using the Akaike and Bayesian information criteria. The results show that the DGP is appropriate for modelling the count of non-life insurance claims and provides a better fit to the regulatory claim data considered.
Mathematics Subject Classification ID: 62P20
Mathematics Subject Classification ID: 62E15
Mathematics Subject Classification ID: 62M10
zbMATH DE Number: 7385429
zbMATH Keywords: insurance claims
zbMATH Keywords: generalised Pareto distribution
describes a project that uses: bootstrap
describes a project that uses: R
MaRDI profile type: MaRDI publication profile
OpenAlex ID: W3171290505
arXiv ID: 2004.06150
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description: scientific article