A nonasymptotic criterion for the evaluation of automobile bonus systems

A new criterion for the evaluation of automobile bonus systems is proposed. It states that a bonus system should be constructed such as to minimize a weighted average of the expected squared rating errors in various insurance periods. The criterion generalizes an asymptotic criterion given earlier by Norberg in 1976. In addition, the new nonasymptotic criterion makes it possible to discuss various short term aspects such as the optimal choice of starting class and the time heterogeneity of risks. Our treatment is illustrated by examples with numerical results.