Application of Credibility Theory to Group Life Pricing: An Introduction
By Manuel Tschupp
31 August 2011
Credibility theory, a branch of Bayesian statistics, is increasingly being used to handle risk-adjusted pricing. However, the most popular credibility models should not be applied to group life insurance business in their classical way due to the possible inadequacy of model assumptions. This paper addresses the question of how modern credibility theory may be used in an appropriate way to determine risk-adjusted premiums in group life pricing. It highlights the basic concepts and their broad applications.
A follow-up report 'Application of Credibility Theory to Group Life Pricing - Extended Techniques' was published in December 2011.