JOINT MODELING OF CLAIM FREQUENCIES AND BEHAVIORAL SIGNALS IN MOTOR INSURANCE

Telematicsdevices installed in insured vehicles provide actuaries with new risk factors, such as the time of the day, average speeds, and other driving habits. This paper extends the multivariate mixed model describing the joint dynamics of telematics data and claim frequencies proposed by Denuit et al. (2019a) by allowing for signals with various formats, not necessarily integer-valued, and by replacing the estimation procedure with the Expected Conditional Maximization algorithm. A numerical study performed on a database related to Pay-How-You-Drive, or PHYD motor insurance illustrates the relevance of the proposed approach for practice.

A survey on driving behavior analysis in usage based insurance using big data

The emergence and growth of connected technologies and the adaptation of big data are changing the face of all industries. In the insurance industry, Usage-Based Insurance (UBI) is the most popular use case of big data adaptation. Initially UBI is started as a simple unitary Pay-As-You-Drive (PAYD) model in which the classification of good and bad drivers is an unresolved task. PAYD is progressed towards Pay-How-You-Drive (PHYD) model in which the premium is charged for the personal auto insurance depending on the post-trip analysis. Providing proactive alerts to guide the driver during the trip is the drawback of the PHYD model. PHYD model is further progressed towards Manage-How-You-Drive (MHYD) model in which the proactive engagement in the form of alerts is provided to the drivers while they drive. The evolution of PAYD, PHYD and MHYD models serve as the building blocks of UBI and facilitates the insurance industry to bridge the gap between insurer and the customer with the introduction of MHYD model. Increasing number of insurers are starting to launch PHYD or MHYD models all over the world and widespread customer adaptation is seen to improve the driver safety by monitoring the driving behavior. Consequently, the data flow between an insurer and their customers is increasing exponentially, which makes the need for big data adaptation, a foundational brick in the technology landscape of insurers. The focus of this paper is to perform a detailed survey about the categories of MHYD. The survey results in the need to address the aggressive driving behavior and road rage incidents of the drivers during short-term and long-term driving. The exhaustive survey is also used to propose a solution that finds the risk posed by aggressive driving and road rage incidents by considering the behavioral and emotional factors of a driver. The outcome of this research would help the insurance industries to assess the driving risk more accurately and to propose a solution to calculate the personalized premium based on the driving behavior with most importance towards prevention of risk.

Multivariate credibility modelling for usage-based motor insurance pricing with behavioural data

Pay-how-you-drive (PHYD) or usage-based (UB) systems for automobile insurance provide actuaries with behavioural risk factors, such as the time of the day, average speeds and other driving habits. These data are collected while the contract is in force with the help of telematic devices installed in the vehicle. They thus fall in the category of a posteriori information that becomes available after contract initiation. For this reason, they must be included in the actuarial pricing by means of credibility updating mechanisms instead of being incorporated in the score as ordinary a priori observable features. This paper proposes the use of multivariate mixed models to describe the joint dynamics of telematics data and claim frequencies. Future premiums, incorporating past experience can then be determined using the predictive distribution of claim characteristics given past history. This approach allows the actuary to deal with the variety of situations encountered in insurance practice, ranging from new drivers without telematics record to contracts with different seniority and drivers using their vehicle to different extent, generating varied volumes of telematics data.