Optimal claim behaviour for vehicle damage insurances

In this paper we analyse the optimal claim behaviour of a risk sensitive policy holder having a vehicle damage insurance. It is proved that the optimal decision is of the form: to claim for damages only if its amount exceeds a certain limit. Moreover, we also derive the optimal stopping rule to terminate the insurance. Finally, some computational results are presented.Markov decision processes;bonus—malus systems;automobile insurance

Optimal claim behaviour for vehicle damage insurances

In this paper we analyse the optimal claim behaviour of a risk sensitive policy holder having a vehicle damage insurance. It is proved that the optimal decision is of the form: to claim for damages only if its amount exceeds a certain limit. Moreover, we also derive the optimal stopping rule to terminate the insurance. Finally, some computational results are presented