Bonus-Malus System in Iran: An Empirical Evaluation

Abstract

The aim of this paper is to represent the Bonus-Malus System (BMS) of Iran, which is a mandatory scheme based on Insurance act num- ber 56. We examine the current Iranian BMS, using various criteria such as elasticity and time of convergence to steady state with respect to the claim frequency as well as nancial balance. We also nd the closed form of stationary distribution of the Iranian BMS that plays a key role in study of BMSs. Moreover, we compare the results with the German and Japan BMS. Finally we give some hints that can be used to improve the performance of the current Iranian BMS.