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Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio

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Main Authors: Rabi’Atul’Adawiyah, Abdul Razak, Norazliani, Md Lazam, Mohd Nazrul, Mohd Amin
Other Authors: norazliani@uitm.edu.my
Format: Article
Language:English
Published: Institute of Engineering Mathematics, Universiti Malaysia Perlis 2022
Subjects:
Bonus-Malus System
Deductible
Insurance
Medical and health
Markov Chain stop loss insurance
Online Access:http://dspace.unimap.edu.my:80/xmlui/handle/123456789/74380
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spelling my.unimap-743802022-02-18T07:09:23Z Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio Rabi’Atul’Adawiyah, Abdul Razak Norazliani, Md Lazam Mohd Nazrul, Mohd Amin norazliani@uitm.edu.my Bonus-Malus System Deductible Insurance Medical and health Markov Chain stop loss insurance Link to publisher's homepage at https://amci.unimap.edu.my/ This paper presents the preliminary work of implementing the BMS in the Medical and Health Insurance (MHI). The application of the Bonus Malus System (BMS) is common in automobile insurance, but having it on MHI is something innovative. This study aims to demonstrate a system that can control the claim amount and frequency while at the same time imposing fair deductibles amount on the MHI’s portfolio. It is believed that, this implementation provides a win-win situation to both insurer and insured. To the insurer, this helps to curb the growth of fraudulent claims and to the insured, this protects the policyholders from being penalised of making necessary claims. This study uses Markov Chain transition models to identify the scale for BMS. The expected claim amount and frequency database were extracted from the Project Oversight Group (POG) research project entitle Group Medical Insurance Large Claims Database Collection and Analysis, and simulated using the Monte Carlo simulation in excel. The fair deductibles amount were defined based on the existing deductibles available in Malaysia. Results show that an ideal scales of the BMS which were demonstrated by equitable claim amount and frequency have produced an effective framework of BMS matrix. Varying deductibles amount ranging from RM2,500 to RM10,000 have given options to the insured to plan for their own claim management. Insureds with lower deductible amounts have the highest probability of being penalised as compared to those with higher deductible amounts. With fair estimations of deductible amounts and effective control of claim system, the BMS framework is seen to be efficient and feasible for the application in the MHI industry. 2022-02-18T07:09:23Z 2022-02-18T07:09:23Z 2021-12 Article Applied Mathematics and Computational Intelligence (AMCI), vol.10(1), 2021, pages 237-251 2289-1315 (print) 2289-1323 (online) http://dspace.unimap.edu.my:80/xmlui/handle/123456789/74380 https://amci.unimap.edu.my/ en Institute of Engineering Mathematics, Universiti Malaysia Perlis
institution Universiti Malaysia Perlis
building UniMAP Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Perlis
content_source UniMAP Library Digital Repository
url_provider http://dspace.unimap.edu.my/
language English
topic Bonus-Malus System
Deductible
Insurance
Medical and health
Markov Chain stop loss insurance
spellingShingle Bonus-Malus System
Deductible
Insurance
Medical and health
Markov Chain stop loss insurance
Rabi’Atul’Adawiyah, Abdul Razak
Norazliani, Md Lazam
Mohd Nazrul, Mohd Amin
Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio
description Link to publisher's homepage at https://amci.unimap.edu.my/
author2 norazliani@uitm.edu.my
author_facet norazliani@uitm.edu.my
Rabi’Atul’Adawiyah, Abdul Razak
Norazliani, Md Lazam
Mohd Nazrul, Mohd Amin
format Article
author Rabi’Atul’Adawiyah, Abdul Razak
Norazliani, Md Lazam
Mohd Nazrul, Mohd Amin
author_sort Rabi’Atul’Adawiyah, Abdul Razak
title Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio
title_short Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio
title_full Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio
title_fullStr Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio
title_full_unstemmed Demonstrating Bonus Malus System (BMS) with fair deductibles amount and control mechanism of claim amount and frequency on Medical and Health Insurance Portfolio
title_sort demonstrating bonus malus system (bms) with fair deductibles amount and control mechanism of claim amount and frequency on medical and health insurance portfolio
publisher Institute of Engineering Mathematics, Universiti Malaysia Perlis
publishDate 2022
url http://dspace.unimap.edu.my:80/xmlui/handle/123456789/74380
_version_ 1729704763619016704
score 13.160551

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