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Credibility ratemaking using collateral information. (English) Zbl 1141.91533
This article examines the connection between credibility models and special classes of linear models and extends the authors’ approach [N. Am. Actuar. J. 5, No. 4, 24–42 (2001; Zbl 1083.91538)] to credibility by formally introducing collateral information through the use of Bayesian methods. The authors introduced the normal hierarchical linear models (HLM), derived its estimations and mean square errors, and demonstrated how to blend collateral information into credibility ratemaking. They also found the link between the credibility estimators from HLM and homogeneous and inhomogeneous estimators that appear in traditional non-Bayesian credibility theory.

MSC:
91B30 Risk theory, insurance (MSC2010)
Software:
HLM
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