Simultaneous borrowing of information across space and time for pricing insurance contracts : an application to rating crop insurance policies

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<title>Simultaneous borrowing of information across space and time for pricing insurance contracts</title>
<subTitle>: an application to rating crop insurance policies</subTitle>
<name type="personal" usage="primary">
<namePart>Liu, Yong</namePart>
<name type="personal">
<namePart>Ker, Alan P.</namePart>
<genre authority="marcgt">periodical</genre>
<placeTerm type="code" authority="marccountry">usa</placeTerm>
<dateIssued encoding="marc">20210301</dateIssued>
<frequency authority="marcfrequency"/>
<languageTerm type="code" authority="iso639-2b">eng</languageTerm>
<form authority="marcform">print</form>
<abstract>Changing climate and technology can often lead to nonstationary losses across both time and space for a variety of insurance lines including property, catastrophe, health, and life. As a result, naive estimation of premium rates using past losses will tend to be biased. We present three successively flexible datadriven methodologies to nonparametrically smooth across both space and time simultaneously, thereby appropriately incorporating possibly nonidentically distributed data into the rating process. We apply these methodologies in estimating U.S. crop insurance premium rates. Crop insurance, with global premiums totaling $4.1 trillion in 2018, is an interesting application as losses exhibit both temporal and spatial nonstationarity. We find significant borrowing of information across both time and space. We also find all three methodologies improve both the stability and accuracy of crop insurance premium rates. The proposed methods may be of relevance for other lines of insurance characterized by spatial and/or temporal nonstationary losses.</abstract>
<note type="statement of responsibility">Yong Liu, Alan P. Ker</note>
<topic>Seguro de cosechas</topic>
<topic>Mercado de seguros</topic>
<topic>Contrato de seguro</topic>
<topic>Tarifa de primas</topic>
<classification authority="">329</classification>
<relatedItem type="host">
<title>The Journal of risk and insurance</title>
<publisher>Nueva York : The American Risk and Insurance Association, 1964-</publisher>
<identifier type="issn">0022-4367</identifier>
<identifier type="local">MAP20077000727</identifier>
<text>01/03/2021 Volumen 88 Número 1 - marzo 2021 , p. 231-257</text>
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<recordCreationDate encoding="marc">210219</recordCreationDate>
<recordChangeDate encoding="iso8601">20210302165656.0</recordChangeDate>
<recordIdentifier source="MAP">MAP20210005701</recordIdentifier>
<languageTerm type="code" authority="iso639-2b">spa</languageTerm>