On a discrete-time two level NCD risk model
نویسندگان
چکیده
This paper proposes a discrete-time NCD risk model that incorporates the well-known No Claims Discount (NCD) system (or bonus-malus system (BMS)) in the car insurance industry. Such a system penalises policyholders at fault in accidents by surcharges, and rewards claim-free years by discounts. For simplicity, only two levels of premium are considered in the given model and recursive formulae are derived for its ultimate ruin probabilities. Then the impact of the NCD system on ruin probabilities is examined through numerical examples. At last, the joint probability of ruin and deficit at ruin is also considered.
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