Winsorized Robust Credibility Models
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The Bühlmann model, a branch of classical credibility theory, has been successively applied to the premium estimation for group insurance contracts and other insurance specifications. In this paper, we develop a robust Bühlmann credibility via the censored version of loss data, or the censored mean (a robust alternative to traditional individual mean). This framework yields explicit formulas of structural parameters in credibility estimation for both scale-shape distribution families, location-scale distribution families, and their variants, which are commonly used to model insurance risks. The asymptotic properties of the proposed method are provided and corroborated through simulations, and their performance is compared to that of credibility based on the trimmed mean. By varying the censoring/trimming threshold level in several parametric models, we find all structural parameters via censoring are less volatile compared to the corresponding quantities via trimming, and using censored mean as a robust risk measure will reduce the influence of parametric loss assumptions on credibility estimation. Besides, the non-parametric estimations in credibility are discussed using the theory of L-estimators. And a numerical illustration from Wisconsin Local Government Property Insurance Fund indicates that the proposed robust credibility can prevent the effect caused by model mis-specification and capture the risk behavior of loss data in a broader viewpoint.
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