Testing Adverse Selection Using Frank Copula Approach in Iran Insurance Markets


Authors

Hadi Safari Katesari - Departmet of Statistics, Shahid Beheshti University, Iran Behrouz Fathi Vajargah - Department of Statistics, University of Guilan, Iran


Abstract

Existence of adverse selection in insurance markets could have irreversible effects on enterprise decision-making process and obligations of insurance companies. In this article, testing adverse selection is done by jointly modeling the coverage selection and accidents frequency using Frank's copula, where the dependence parameter states the existence of relationship between coverage selection and the frequency of accidents. Our margins are modeled by ordered logistic regression model for the coverage selection and negative binomial regression model for the accidents frequency. The copula model is calibrated using 59,547 one-year cross-sectional cases of collision insurance coverage of Iran Insurance co. The results indicate a significant positive coverage selection-accidents frequency relationship.


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ISRP Style

Hadi Safari Katesari, Behrouz Fathi Vajargah, Testing Adverse Selection Using Frank Copula Approach in Iran Insurance Markets, Journal of Mathematics and Computer Science, 15 (2015), no. 2, 154-158

AMA Style

Katesari Hadi Safari, Vajargah Behrouz Fathi, Testing Adverse Selection Using Frank Copula Approach in Iran Insurance Markets. J Math Comput SCI-JM. (2015); 15(2):154-158

Chicago/Turabian Style

Katesari, Hadi Safari, Vajargah, Behrouz Fathi. "Testing Adverse Selection Using Frank Copula Approach in Iran Insurance Markets." Journal of Mathematics and Computer Science, 15, no. 2 (2015): 154-158


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