Home An Evaluation of the New Japanese Bonus–Malus System with No-claim and Claimed Subclasses
Article
Licensed
Unlicensed Requires Authentication

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

  • Mahito Okura EMAIL logo , Takuya Yoshizawa and Motohiro Sakaki
Published/Copyright: January 30, 2020

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.

JEL Classification: C63; G22

Acknowledgements

The authors are grateful to the anonymous reviewers. The authors also offer their appreciation to the participants of the IRFRC & APRIA 2018 Joint Conference. This work was supported by JSPS KAKENHI Grant Numbers JP15K03727 (Mahito Okura) and JP26380118 (Motohiro Sakaki).

References

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=1.10.2139/ssrn.1260168Search in Google Scholar

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: 10.1007/978-1-4614-0155-1_10.Search in Google Scholar

Cooper, Russell, and Beth Hayes. 1987. “Multi-period Insurance Contracts.” International Journal of Industrial Organization 5 (2): 211–231. DOI: 10.1007/978-94-015-7957-5_20.Search in Google Scholar

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: 10.1086/261929.Search in Google Scholar

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: 10.1007/978-1-4614-0155-1_10.Search in Google Scholar

Dionne, Georges, and Pierre Lasserre. 1985. “Adverse selection, Repeated Insurance Contracts and Announcement Strategy.” Review of Economic Studies 52 (4): 719–723. DOI: 10.2307/2297743.Search in Google Scholar

Doherty, Neil, and Kent Smetters. 2005. “Moral Hazard in Reinsurance Markets.” Journal of Risk and Insurance 72 (3): 375–391.10.3386/w9050Search in Google Scholar

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.Search in Google Scholar

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.Search in Google Scholar

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.Search in Google Scholar

Lemaire, Jean. 1988. “A Comparative Analysis of Most European and Japanese Bonus-malus Systems.” Journal of Risk and Insurance 55 (4): 660–681. doi: 10.2307/253143.Search in Google Scholar

Lemaire, Jean. 1995. Bonus-Malus Systems in Automobile Insurance. Boston: Kluwer Academic Publishers.10.1007/978-94-011-0631-3Search in Google Scholar

Lemaire, Jean, and Hongmin Zi. 1994. “A Comparative Analysis of 30 Bonus-malus Systems.” ASTIN Bulletin 24 (2): 287–309. DOI: 10.2143/ast.24.2.2005071.Search in Google Scholar

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: 10.1515/apjri-2016-0038.Search in Google Scholar

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.Search in Google Scholar

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

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: 10.1016/j.insmatheco.2018.09.002.Search in Google Scholar

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: 10.1057/gpp.2010.37.Search in Google Scholar

Robinson, Chris, and Bingyong Zheng. 2010. “Moral hazard, Insurance Claims, and Repeated Insurance Contracts.” Canadian Journal of Economics 43 (3): 967–993. doi: 10.1111/j.1540-5982.2010.01602.x.Search in Google Scholar

Rubinstein, Ariel, and Menahem E. Yaari. 1983. “Repeated Insurance Contracts and Moral Hazard.” Journal of Economic Theory 30 (1): 74–97. doi: 10.1016/0022-0531(83)90094-7.Search in Google Scholar

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: 10.1111/j.1539-6975.2006.00178.x.Search in Google Scholar

Published Online: 2020-01-30

© 2020 Walter de Gruyter GmbH, Berlin/Boston

Downloaded on 12.9.2025 from https://www.degruyterbrill.com/document/doi/10.1515/apjri-2019-0004/html
Scroll to top button