Findings from University of Melbourne in the Area of Actuarial Science Reported (A New Multivariate Zero-inflated Hurdle Model With Applications In Automobile Insurance): Science – Actuarial Science

2022 JAN 27 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- A new study on Science - Actuarial Science is now available. According to news reporting out of Melbourne, Australia, by NewsRx editors, research stated, “The fact that a large proportion of insurance policyholders make no claims during a one-year period highlights the importance of zero-inflated count models when analyzing the frequency of insurance claims. There is a vast literature focused on the univariate case of zero-inflated count models, while work in the area of multivariate models is considerably less advanced.”

Financial support for this research came from University of Melbourne Faculty of Business and Economics Doctoral Program Scholarship.

Our news journalists obtained a quote from the research from the University of Melbourne, “Given that insurance companies write multiple lines of insurance business, where the claim counts on these lines of business are often correlated, there is a strong incentive to analyze multivariate claim count models. Motivated by the idea of Liu and Tian (Computational Statistics and Data Analysis, 83, 200-222; 2015), we develop a multivariate zero-inflated hurdle model to describe multivariate count data with extra zeros. This generalization offers more flexibility in modeling the behavior of individual claim counts while also incorporating a correlation structure between claim counts for different lines of insurance business. We develop an application of the expectation-maximization (EM) algorithm to enable the statistical inference necessary to estimate the parameters associated with our model. Our model is then applied to an automobile insurance portfolio from a major insurance company in Spain.”

According to the news editors, the research concluded: “We demonstrate that the model performance for the multivariate zero-inflated hurdle model is superior when compared to several alternatives.”

This research has been peer-reviewed.

For more information on this research see: A New Multivariate Zero-inflated Hurdle Model With Applications In Automobile Insurance. Astin Bulletin, 2022. Astin Bulletin can be contacted at: Cambridge Univ Press, Edinburgh Bldg, Shaftesbury Rd, CB2 8RU Cambridge, England.

Our news journalists report that additional information may be obtained by contacting Xueyuan Wu, University of Melbourne, Dept. of Economics, Ctr Actuarial Studies, Melbourne, Vic 3010, Australia. Additional authors for this research include Pengcheng Zhang and David Pitt.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1017/asb.2021.39. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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