An Evaluation of the New Japanese Bonus–Malus System with No-claim and Claimed Subclasses

Mahito Okura
  • Corresponding author
  • Department of Social System Studies, Faculty of Contemporary Social Studies, Doshisha Women’s College of Liberal Arts, Kodo, Kyotanabe, Kyoto 610-0395, Japan
  • Email
  • Search for other articles:
  • degruyter.comGoogle Scholar
, Takuya Yoshizawa and Motohiro Sakaki

Abstract

The purpose of this research is to evaluate the new Japanese Bonus–Malus System (BMS 2012) in automobile insurance, which is an unusual system wherein both no-claim and claimed subclasses exist. To evaluate BMS 2012, we conduct a simulation analysis and compare BMS 2012 with the former Japanese BMS (BMS 2009) in terms of the present value of the total insurance premium that is closely related to the frequency of insurance claims. Based on the comparison, our main conclusion is that BMS 2012 offers more effects to lower the frequency of insurance claims than BMS 2009 does when the policyholders’ classes in BMS are high classes that evaluate as safety drivers, time discount and/or renewal rates are relatively low, and the policyholders’ risk averseness is large.

  • Abbring, Jaap H., Pierre-André Chiappori, and Tibor Zavadil. (2008). Tinbergen Institute Discussion Paper, TI 2008-075/3. Accessed November 13, 2019. Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance Data. http://dare.ubvu.vu.nl/bitstream/handle/1871/12965/08075.pdf?sequence=1.

  • Chiappori, Pierre-André, and Bernard Salanié. 2013. “Asymmetric Information in Insurance Markets: Predictions and Tests,” in Handbook of Insurance, edited by G. Dionne, 397–422. New York: Springer. DOI: .

    • Crossref
    • Export Citation
  • Cooper, Russell, and Beth Hayes. 1987. “Multi-period Insurance Contracts.” International Journal of Industrial Organization 5 (2): 211–231. DOI: .

    • Crossref
    • Export Citation
  • Dionne, Georges, and Neil A. Doherty. 1994. “Adverse Selection, Commitment, and Renegotiation: Extension to and Evidence from Insurance Markets.” Journal of Political Economy 102 (2): 209–235. DOI: .

    • Crossref
    • Export Citation
  • Dionne, Georges, Nathalie Fombaron, and Neil Doherty. 2013. “Adverse Selection in Insurance Contracting,” in Handbook of Insurance, edited by G. Dionne, 2nd 231–280. New York: Springer. DOI: .

    • Crossref
    • Export Citation
  • Dionne, Georges, and Pierre Lasserre. 1985. “Adverse selection, Repeated Insurance Contracts and Announcement Strategy.” Review of Economic Studies 52 (4): 719–723. DOI: .

    • Crossref
    • Export Citation
  • Doherty, Neil, and Kent Smetters. 2005. “Moral Hazard in Reinsurance Markets.” Journal of Risk and Insurance 72 (3): 375–391.

  • GIROJ (General Insurance Rating Organization of Japan). 2011. “(Reference) 2012 Revision of Reference Loss Cost Rates for Voluntary Automobile Insurance.” (in Japanese). Accessed November 13, 2019. https://www.giroj.or.jp/ratemaking/automobile/201109_detail.html.

  • GIROJ (General Insurance Rating Organization of Japan). 2014, 2015, 2016, 2017. “Automobile Insurance in Japan.” (in Japanese). Accessed November 13, 2019. https://www.giroj.or.jp/publication/outline_j.

  • Kamiya, Shinichi. 2006. “Insurance as a Giffen Good under a Bonus-malus System and Its Effect on Adverse Selection.” Accessed November 13, 2019. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.318.4342&rep=rep1&type=pdf.

  • Lemaire, Jean. 1988. “A Comparative Analysis of Most European and Japanese Bonus-malus Systems.” Journal of Risk and Insurance 55 (4): 660–681. doi: .

    • Crossref
    • Export Citation
  • Lemaire, Jean. 1995. Bonus-Malus Systems in Automobile Insurance. Boston: Kluwer Academic Publishers.

  • Lemaire, Jean, and Hongmin Zi. 1994. “A Comparative Analysis of 30 Bonus-malus Systems.” ASTIN Bulletin 24 (2): 287–309. DOI: .

    • Crossref
    • Export Citation
  • Mahmoudvand, Rahim, Chong It Tan, and Narges Abbasi. 2017. “Adjusting the Premium Relativities in a Bonus-malus System: An Integrated Approach Using the First Claim Time and the Number of Claims.” Asia-Pacific Journal of Risk and Insurance 11 (2): 1–19. DOI: .

    • Crossref
    • Export Citation
  • Mayuzumi, Tetsuji. 1999. “A Study of the Bonus-malus System.” ASTIN Colloquium. Accessed November 13, 2019. http://www.actuaires.org/ASTIN/colloquia/Tokyo/papers.cfm.

  • National Police Agency. 2002, 2012. “Driver License Statistics.” Accessed November 13, 2019. https://www.npa.go.jp/publications/statistics/koutsuu/menkyo.html.

  • Park, Sojung C., Joseph H. T. Kim, and Jae Youn Ahn. 2018. “Does Hunger for Bonuses Drive the Dependence between Claim Frequency and Severity?” Insurance: Mathematics and Economics 83: 32–46. doi: .

    • Crossref
    • Export Citation
  • Park, Sojung C., Jean Lemaire, and Choong Tze Chua. 2010. “Is the Design of Bonus-malus Systems Influenced by Insurance Maturity or National Culture? — Evidence from Asia.” Geneva Papers on Risk and Insurance: Issues and Practice 35 (1): S7–S27. DOI: .

    • Crossref
    • Export Citation
  • Robinson, Chris, and Bingyong Zheng. 2010. “Moral hazard, Insurance Claims, and Repeated Insurance Contracts.” Canadian Journal of Economics 43 (3): 967–993. doi: .

    • Crossref
    • Export Citation
  • Rubinstein, Ariel, and Menahem E. Yaari. 1983. “Repeated Insurance Contracts and Moral Hazard.” Journal of Economic Theory 30 (1): 74–97. doi: .

    • Crossref
    • Export Citation
  • Saito, Kuniyoshi. 2006. “Testing for Asymmetric Information in the Automobile Insurance Market under Rate Regulation.” Journal of Risk and Insurance 73 (2): 335–356. doi: .

    • Crossref
    • Export Citation
Purchase article
Get instant unlimited access to the article.
$42.00
Price including VAT
Log in
Already have access? Please log in.


Journal + Issues

The Asia-Pacific Journal of Risk and Insurance ( APJRI) focuses on risk management and insurance issues of importance to the Asia-Pacific region. An interdisciplinary publication, APJRI facilitates the exchange of research in risk and insurance mathematics, economics, finance, and corporate practice. The journal welcomes theoretical and applied research papers on a variety of specific topics.

Search