Comparison of no claim discount (NCD) systems

No claim discount system (NCD) is used in non-life insurance and also it is widely used in motor insurance. NCD systems penalize policyholders at fault in accidents by premium increase, and reward claim-free years by premium discount. By doing this, policyholders are subdivided into homogeneous classes according to their typical variables and are encouraged to drive carefully.In this thesis, first, some information about situation of motor insurance and the use of NCD systems in both Turkey and the World is given. The claim number distributions and use the method of simulation for deciding the optimum NCD system are explained in detail. In addition, generating random variable methods from claim number and claim amount distributions that are used in the simulation are explained.In the application, a NCD system that is widely used for motor insurance in Turkey is defined, and by using the motor insurance data of year 2008 an optimal system is tried to reach with the simulation method. Simulation program is written in MATLAB. As a result of the simulation program, for each year number of claims, amount of claims, number of claimants, number of policyholders in each discount class, premium income and claim outgo year is obtained. In order to reach optimum HIS on the bases of the long-term results obtained from the simulation program, changes are made on the transition rules and premiums. Finally, by increasing the premiums, optimal system was reached.