On the validation of claims with excess zeros in liability insurance: a comparative study

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Abstract

In this study, we consider the problem of zero claims in a liability insurance portfolio and compare the predictability of three models. We use French motor third party liability (MTPL) insurance data, which has been used for a pricing game, and show that how the type of coverage and policyholders’ willingness to subscribe to insurance pricing, based on telematics data, affects their driving behaviour and hence their claims. Using our validation set, we then predict the number of zero claims. Our results show that although a zero-inflated Poisson (ZIP) model performs better than a Poisson regression, it can even be outperformed by logistic regression.

Original languageEnglish
Article number71
JournalRisks
Volume7
Issue number3
Early online date30 Jun 2019
DOIs
Publication statusPublished - Sep 2019

Keywords

  • Generalised linear modelling
  • Telematics
  • Validation
  • Zero-inflated poisson model

ASJC Scopus subject areas

  • Accounting
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management

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