This article concerns competition between different bonus-malus systems coexisting on the obligatory automobile insurance market. Four extreme types of BMS with 'fair' transition rules treat any driver with a given claim history in a very different way. If these systems coexisted on an obligatory insurance market, each of them would attract clients with different claim history. This would influence the size and structure of portfolios in insurance companies using each of the systems, and financial situation of the insurers and the insureds as well. The question remains if all the systems could survive this competition and how the existence of other systems on the market might influence the tariff function of each of them. The aim of this article is to present a dynamic multi-equation random-decision model which enables an analysis of market competition using Markov chains.
Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.