Sample Size Determination for Credibility Estimation

Abstract

The credibility estimator has been successfully and widely applied by practitioners in the insurance industry for decades. However, an important issue remains unresolved: What sample size should the actuary choose when he or she applies the credibility estimator? In particular, is the size of a given claims dataset large enough for the credibility estimator to be accurate? This article aims to address this issue by first suggesting a sample size criterion for the credibility estimator and then proposing a sample size based on that. The proposed sample size is easy to apply, and it guarantees provable accuracy for credibility estimation.

This article is referred to by:

Discussion on “Sample Size Determination for Credibility Estimation,” by Liang Hong, Volume 26(4)

ACKNOWLEDGMENTS

Thanks are due to the Editor and two anonymous reviewers for many useful comments and suggestions. I also thank Ryan Martin for a fruitful discussion.

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