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Optimizing Claims Fluctuation Reserves

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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Science INFORMS

Optimizing Claims Fluctuation Reserves

10 pages

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References (2)

Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article
ISSN
0025-1909
eISSN
1526-5501
DOI
10.1287/mnsc.23.11.1199
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Management ScienceINFORMS

Published: Jul 1, 1977

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