Bonus-Malus System And Its Application In China

In auto insurance, Bonus-Malus system developed a great deal of effect on premiums, Bonus-Malus system is based on the risk to develop premiums. In insurance, different policyholders have different risks, the different insurance companies based on individual risk of the insured, to develop different premiums, premiums can be fair and reasonable, so that high-risk policyholders pay higher premiums, low-risk policyholders pay lower premiums, in this way, can attract policyholders to insure.How to can make a fair and reasonable insurance premium? First to classify the risks, in the same category of risks in the policy are homogeneous, different types of insurance policies are non-homogeneous. Bonus-Malus system is one way to distinguish different policyholders’ risk, based on the number of policyholders’ claims in the past to determine the risks, so as to provide appropriate rewards or punishment measures. Such measures is to punish the high-risk drivers, reward the low-risk drivers, encouraging drivers to drive safely,so that the premiums paid by the insured person proportionate to the risks.Studies on BMS can be traced back to the earliest in the mid1950of the20th century to the early60’s in Europe, its theoretical maturity is mainly due to Delaporte (1965), Bichsel (1964) and the Buhlmann (1964). Now scholars’ research focuses on three aspects of the BMS:Firstly,basic theory about the BMS and stringent evaluation of the BMS system;Secondly, how to design the BMS design; Thirdly, premium rewards and punishments system developed and the impact on policyholders and insurance companies, as well as related research.Study on the second aspect is now the core of the research.Chinese scholar Yuan Wei and Meng Shengwang do a lot of research on the study of BMS, also have got some research results, they do some research on our current BMS, from different aspects, such as the establishment of the most premium system, and after joining the deductible and retention, to find how to impact the BMS. They from different angles to analyze their strengths and weaknesses, and put forward constructive proposals.BMS is an experience assessment fee system, in order to determine appropriate premiums, it is very important to assess the risk of policyholders, then according to the number of policyholders1claims to determine individual risk, this is a more feasible approach. To determine premiums will involve two aspects:one is to identify the basic premium, the second is to determine the renewal premium, in which renewal premium is determined by BMS. BMS is closely related with the formulation of the premium. The purpose of the BMS is to more accurately evaluate the risk of each policyholder. The long-term view, the premium paid per insured person should be corresponding to the number of claims. The purposes can be summarized into three:first, the premiums of the insured should be able to reflect the true level of risk and, secondly, reduce the cost of insurance companies to receive small compensation; and, thirdly, encouraging motorists to care while driving, in this way to achieve the purpose of control risks. Therefore, how to design a scientific and reasonable BMS is an important issue, this issue has practical significance of automobile premiums.BMS is a system of rewards and punishments. Under this article, the theory of BMS is discussed separately in different risk assumptions, such as an insurance policy is a homogeneous policy and warranty single, the corresponding distribution models using different number of claims, then use this model to fit, if the model can through inspection, we could use it to study the China’s BMS and Beijing’s BMS, evaluate and compare them. Content and the results of this study are as follows.Under the Markov chain assumes, that insured in homogeneity and non-homogeneity and different circumstances, the impact on the BMS generated by the distribution of the number of claims, such as its stationary distribution model. In the case study the distribution of the number of claims, and then study the claim amount of variables intended premiums. When the BMS is known, according to its national circumstances in different countries and regions, setting different BMS, even in the same country, different insurance companies may also take a variety of BMS, it will have an evaluation of the system, namely, research of the harshness of its system, such as variation coefficient, the average maximum of retention and other indicators, various specific indicators have different meaning.In this paper, we study the Version07of BMS and BMS in Beijing area, calculated harshness indicators to evaluate, and to compare them, then concluded.