CLAIMS ESTIMATION IN MULTIPRODUCT LIFE-INSURANCE FIRMS - PRELIMINARY UNITED-KINGDOM RESULTS

In the insurance industry, claims tend to constitute the major proport ion of the total annual outgoings across almost all product lines. Thi s preliminary study develops a cost function of insurance claims and a pplies the model to 1988-93 data from the UK life insurance industry. In general, the results support the hypothesis that larger life insura nce firms on average face bigger claims-to-premium ratios than smaller firms. There is also evidence of a positive relationship between clai ms and the degree of specialization in the provision of life insurance products. Finally, there is clear support for the view that stock fir ms have a less severe claims experience than mutuals. We conclude that the model provides intuitive insights into the determinants of insura nce claims which could help to stimulate and direct further research.