Premium allocation – Fuzzy approach in insurance business

Abstract

With lot of players in insurance market and to retain the existing customer base, the market seems to be very aggressive. Every institution has been trying to woo new customers with new products and offer new policies every now and then to existing customers. The challenge for holding the market share and maintain a consistent growth rate has been a pain area in recent years. Statisticians and actuaries have always been on toes in formulating new rules to provide extra leverage over other counterparts in market. Since the factor to which the risk value is attached is always give to new ideas towards insurance. This approach provides a third dimension to the existing method of calculating premiums , which is dynamic and may be further refined to address to every individual needs. Therefore a fuzzy logic approach is used to determine the premium.