Will claim history become a deprecated rating factor? An optimal design method for the real-time road risk model

Abstract

With the popularity of Telematics and Self-driving, more and more rating factors, such as mileage, route, driving behavior, etc., are introduced into actuarial models. There are quite a few doubts and disputes on the rationality and accuracy of the selection of rating variables, but it does not involve the widely accepted historical claim records. Recently, Tesla Insurance released a new generation of Safety Score-based insurance, irrespective of accident history. Forward-looking experts and scholars began to discuss whether claim history will disappear in the future auto insurance rate-making system. Therefore, this paper proposes a new risk variable elimination method as well as a real-time road risk model design framework and concludes that claim history will be regarded as a "noise" factor and deprecated in the Pay-How-You-Drive model.