Quest for Optimal Bonus-Malus in Automobile Insurance in Developing Economies: An Actuarial Perspective

Ade Ibiwoye, I. A. Adeleke, S. A. Aduloju

Abstract


This paper evaluates the bonus-malus system in practice in the Nigerian motor insurance industry. It would appear that the regulation is a bit fluid so that what actually looks like a bonus-malus system is more like a rule of thumb as operators do not honor the industry agreed tariff. This paper constructs an alternative bonus-malus scale that has reasonable penalties and that is yet commercially feasible. The model can easily be replicated for other developing economies.


Full Text: PDF DOI: 10.5539/ibr.v4n4p74

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International Business Research  ISSN 1913-9004 (Print), ISSN 1913-9012 (Online)

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