Abraham, Jon P.
In insurance, actuaries need to decide how much they trust each policyholder’s experience rate. Credibility theory is the study of how much merit to give a policyholder’s experience. Using data provided by Unum, the Buhlmann-Straub approach to credibility was found to raise loss ratios overall, while still being under the Tolerable Loss Ratio. Thus, Unum’s customers may be overcharged for their coverage and competitors may price their insurance lower than Unum, while meeting their own Tolerable Loss Ratios.
Worcester Polytechnic Institute
Major Qualifying Project
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