MAP20140025077Frees, Edward W.Insurance ratemaking and a gini index / Edward W. (Jed) Frees, Glenn Meyers, A. David CummingsSumario: Welfare economics uses Lorenz curves to display skewed income distributions and Gini indices to summarize the skewness. This article extends the Lorenz curve and Gini index by ordering insurance risks; the ordering variable is a risk-based score relative to price, known as a relativity. The new relativity-based measures can cope with adverse selection and quantify potential profit. Specifically, we show that the Gini index is proportional to a correlation between the relativity and an out-of-sample profit (price in excess of loss). A detailed example using homeowners insurance demonstrates the utility of these new measuresEn: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 02/06/2014 Volumen 81 Número 2 - junio 2014 I. Title.
