BONUS MALUS SYSTEM EFFICIENCY USING MARKOV CHAIN

• Main Author: Junaidy
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/65422
• Institution: Institut Teknologi Bandung

Competition between insurance companies have become fierce in result of booming insurance industry and vast amounts of insurance companies. One approach from insurance companies to be able to compete is through bonus malus system. Bonus malus system is a rule of increasing premium rate if policyholder make an insurance claim for compensation to a policy event and decreasing premium rate if no claim has been made by policyholder. However, the rule of increase and decrease premium rate will inflict financial loss to one party, either the insurance company or the policyholders. Efficiency is a measurement of the balance of bonus malus system. In this thesis, the Dutch, PZU, AXA, and MTU bonus malus system Loimaranta efficiency will be analyzed using Markov chain to find the highest efficiency. Furthermore, this thesis also analyzed the effect of changing rules of transition, adding more bonus malus classes, and changing premium rate towards the bonus malus system efficiency. After analyzing those three factors, then we can start simulating Dutch bonus malus system with ideal efficiency.