Optimizing Claims Fluctuation Reserves

Many group insurance programs are characterized by experience rating features which imply that a surplus resulting from favorable experience belongs to the group, while the administering insurance company is to be reimbursed for a deficit resulting from unfavorable experience. Due to the volatile nature of claims, a claims fluctuation reserve is frequently established in order to reduce frequent rebates or premium adjustments resulting from surplus or deficit positions. A model is presented for resolving the rebate question and determining the design parameters of a claims fluctuation reserve. The model is formulated for non-stationary conditions and uses the first passage time concept as part of a chance constraint criterion. Results of an actual application are reported.

• 저널Management Science · 23(11) · 1199–1207
• 토픽Blockchain Technology Applications and Security · Information Systems
• DOI10.1287/mnsc.23.11.1199
• 저자Christoph Haehling von Lanzenauer, Don D. Wright