City Research Online

Abstract

We present a dynamic pay-how-you-drive pricing scheme for motor insurance using telematics signals. More specifically, our approach allows the insurer to apply penalties to a baseline premium on the occurrence of events such as hard acceleration or braking. In addition, we incorporate a Bonus-Malus System (BMS) adapted for telematics data, providing a credibility component based on past telematics signals to the claim frequency predictions. We purposefully consider a weekly setting for our ratemaking approach to benefit from the signal’s high-frequency rate and to encourage safe driving via dynamic premium corrections. Moreover, we provide a detailed structure that allows our model to benefit from historical records and detailed telematics data collected weekly through an onboard device. We showcase our results numerically in a case study using data from an insurance company.

Publication Type:	Article
Additional Information:	This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited. © The Author(s), 2024. Published by Cambridge University Press on behalf of The International Actuarial Association
Publisher Keywords:	ratemaking · motor insurance · bonus-malus · near-miss · telematics data
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:	Symplectic Administrator

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