THE APPLICATION OF LINEAREMPIRICALBAYESIAN (LEB) METHOD TO DETERMINETHEPREMIUM IN MOTOR VEHICLE INSURANCE

Abstract

Insurance is necessary nowadays, because insurance can cover a loss or damagethat occurs. The way insurance works in order to cover losses, a personcansubmit a claim provided that the person is registered as a customer and is obligedto pay dependents. In this case the dependents are called premiums. The amount of premium obtained comes from many factors, for example in motor vehicleinsurance seen from the condition of the vehicle, claim frequency, and claimamount. Then the data obtained is calculated using a method that supports thedetermination of premiums, one of which is the Linear Empirical Bayesianmethod. In this study, calculations were carried out to determine the amount of premium using the Linear Empirical Bayesian method, where this methodwasused to find the estimated expected value of XYZ insurance data in the formof claim frequency in 2020 and claim amount in 2015 and 2020. In the analysis, theestimated expectation of the claim frequency E(K)=0.89393 and the optimal expectation of the claim amount E(X)=$434.11 are obtained, then the results aremultiplied to determine the amount of premium in the future, with the formulaP=E(K)×E(X), P=0.89393 × $434.11 and the result is $388.07.