Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss

In this paper, we examine the question of how to devise an optimal insurance claim settlement scheme under the constraint of a cap on the amount of the claim payment. We establish objective functions to maximize the net benefit due to exaggerated claims while at the same time maximizing the total ex...

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Main Authors: Hong Mao, Krzysztof Ostaszewski
Format: Article
Language:English
Published: MDPI AG 2021-12-01
Series:Mathematics
Subjects:
Online Access:https://www.mdpi.com/2227-7390/9/24/3284
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author Hong Mao
Krzysztof Ostaszewski
author_facet Hong Mao
Krzysztof Ostaszewski
author_sort Hong Mao
collection DOAJ
description In this paper, we examine the question of how to devise an optimal insurance claim settlement scheme under the constraint of a cap on the amount of the claim payment. We establish objective functions to maximize the net benefit due to exaggerated claims while at the same time maximizing the total expected wealth of the insured. Then, we establish a dual objective function to minimize the total expected loss, including the perspective of the insurer. Finally, we illustrate applications of our work and provide numerical analysis of it along with an example.
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spelling doaj.art-a0bc3c47e08249bb80ea8c5b9dfc23dd2023-11-23T09:26:57ZengMDPI AGMathematics2227-73902021-12-01924328410.3390/math9243284Optimal Claim Settlement Strategies under Constraint of Cap on Claim LossHong Mao0Krzysztof Ostaszewski1School of Economics and Management, Shanghai Second Polytechnic University, Shanghai 201209, ChinaDepartment of of Mathematics, Illinois State University, Normal, IL 61790-4520, USAIn this paper, we examine the question of how to devise an optimal insurance claim settlement scheme under the constraint of a cap on the amount of the claim payment. We establish objective functions to maximize the net benefit due to exaggerated claims while at the same time maximizing the total expected wealth of the insured. Then, we establish a dual objective function to minimize the total expected loss, including the perspective of the insurer. Finally, we illustrate applications of our work and provide numerical analysis of it along with an example.https://www.mdpi.com/2227-7390/9/24/3284insurance contractinsurance claimclaim capinsured loss
spellingShingle Hong Mao
Krzysztof Ostaszewski
Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss
Mathematics
insurance contract
insurance claim
claim cap
insured loss
title Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss
title_full Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss
title_fullStr Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss
title_full_unstemmed Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss
title_short Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss
title_sort optimal claim settlement strategies under constraint of cap on claim loss
topic insurance contract
insurance claim
claim cap
insured loss
url https://www.mdpi.com/2227-7390/9/24/3284
work_keys_str_mv AT hongmao optimalclaimsettlementstrategiesunderconstraintofcaponclaimloss
AT krzysztofostaszewski optimalclaimsettlementstrategiesunderconstraintofcaponclaimloss