In this paper, we present a new family of bivariate mixed exponential regression models for taking into account the positive correlation between the cost of claims from motor third party liability bodily injury and property damage in a versatile manner. Furthermore, we demonstrate how maximum likelihood estimation of the model parameters can be achieved via a novel Expectation-Maximization algorithm. The implementation of two members of this family, namely the bivariate Pareto or, Exponential-Inverse Gamma, and bivariate Exponential-Inverse Gaussian regression models is illustrated by a real data application which involves fitting motor insurance data from a European motor insurance company.
- Expectation-Maximization algorithm
- bivariate claim size modeling
- motor third party liability insurance
- regression models for the marginal means and dispersion parameters
ASJC Scopus subject areas
- Economics, Econometrics and Finance (miscellaneous)
- Strategy and Management