When Inflation Causes No Increase in Claim Amounts
It is well known that when (re)insurance coverages involve a deductible, the impact of inflation of loss amounts is distorted, and the changes in claims paid by the (re)insurer cannot be assumed to reflect the rate of inflation. A particularly interesting phenomenon occurs when losses follow a Paret...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Wiley
2009-01-01
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| Series: | Journal of Probability and Statistics |
| Online Access: | http://dx.doi.org/10.1155/2009/943926 |
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| _version_ | 1832552714774511616 |
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| author | Vytaras Brazauskas Bruce L. Jones Ričardas Zitikis |
| author_facet | Vytaras Brazauskas Bruce L. Jones Ričardas Zitikis |
| author_sort | Vytaras Brazauskas |
| collection | DOAJ |
| description | It is well known that when (re)insurance coverages involve a deductible, the
impact of inflation of loss amounts is distorted, and the changes in claims paid by the
(re)insurer cannot be assumed to reflect the rate of inflation. A particularly interesting
phenomenon occurs when losses follow a Pareto distribution. In this case, the observed loss
amounts (those that exceed the deductible) are identically distributed from year to year
even in the presence of inflation. Nevertheless, in this paper we succeed in estimating the
inflation rate from the observations. We develop appropriate statistical inferential methods
to quantify the inflation rate and illustrate them using simulated data. Our solution hinges
on the recognition that the distribution of the number of observed losses changes from year
to year depending on the inflation rate. |
| format | Article |
| id | doaj-art-71a24421be7f4d018ef2a5ea5ab30ece |
| institution | Kabale University |
| issn | 1687-952X 1687-9538 |
| language | English |
| publishDate | 2009-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Probability and Statistics |
| spelling | doaj-art-71a24421be7f4d018ef2a5ea5ab30ece2025-02-03T05:58:05ZengWileyJournal of Probability and Statistics1687-952X1687-95382009-01-01200910.1155/2009/943926943926When Inflation Causes No Increase in Claim AmountsVytaras Brazauskas0Bruce L. Jones1Ričardas Zitikis2Department of Mathematical Sciences, University of Wisconsin-Milwaukee, P.O. Box 413, Milwaukee, WI 53201, USADepartment of Statistical and Actuarial Sciences, University of Western Ontario, London, ON, N6A 5B7, CanadaDepartment of Statistical and Actuarial Sciences, University of Western Ontario, London, ON, N6A 5B7, CanadaIt is well known that when (re)insurance coverages involve a deductible, the impact of inflation of loss amounts is distorted, and the changes in claims paid by the (re)insurer cannot be assumed to reflect the rate of inflation. A particularly interesting phenomenon occurs when losses follow a Pareto distribution. In this case, the observed loss amounts (those that exceed the deductible) are identically distributed from year to year even in the presence of inflation. Nevertheless, in this paper we succeed in estimating the inflation rate from the observations. We develop appropriate statistical inferential methods to quantify the inflation rate and illustrate them using simulated data. Our solution hinges on the recognition that the distribution of the number of observed losses changes from year to year depending on the inflation rate.http://dx.doi.org/10.1155/2009/943926 |
| spellingShingle | Vytaras Brazauskas Bruce L. Jones Ričardas Zitikis When Inflation Causes No Increase in Claim Amounts Journal of Probability and Statistics |
| title | When Inflation Causes No Increase in Claim Amounts |
| title_full | When Inflation Causes No Increase in Claim Amounts |
| title_fullStr | When Inflation Causes No Increase in Claim Amounts |
| title_full_unstemmed | When Inflation Causes No Increase in Claim Amounts |
| title_short | When Inflation Causes No Increase in Claim Amounts |
| title_sort | when inflation causes no increase in claim amounts |
| url | http://dx.doi.org/10.1155/2009/943926 |
| work_keys_str_mv | AT vytarasbrazauskas wheninflationcausesnoincreaseinclaimamounts AT bruceljones wheninflationcausesnoincreaseinclaimamounts AT ricardaszitikis wheninflationcausesnoincreaseinclaimamounts |