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Generating an Optimal Auto Insurance Ratewith the Consideration of Population Change
Journal of Insurance and Finance
2016, 27(2),
pp.81-109
DOI :10.23842/jif.2016.27.2.003
Publisher : Korea Insurance Research Institute
Research Area : Business Management
DOI :10.23842/jif.2016.27.2.003
Publisher : Korea Insurance Research Institute
Research Area : Business Management
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Currently, Korean auto insurers have to cope with the world-fastest population ageing under the environments that force them to use premiums that are below break-even points. Unlike other property-casualty insurance lines, Korean auto insurers cannot apply break-even insurance premiums, calculated with the consideration of trend, due to financial authorities' interference and severe market competition. Therefore, it is practically impossible for auto insurers to apply break-even premiums with the consideration of trends in loss ratios of age-groups. This research was conducted to show that auto insurers can improve their profit by using optimal age-group rates, which are calculated with the consideration of population change. To pursue this purpose, we demonstrate that age-groups of auto insurance have distinct loss-ratio trends. Then we explain how insurers can maximize(minimize) their profits(losses) by taking these trends into consideration in calculating age-groups' auto insurance rates.
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