Credibility Theory and Its Using In Insurance Practice

The subject of this paper is to introduce the theory of credibility. Credibility theory is a set of quantitative tools that allows an insurer to estimate future premiums based on past experience of policyholder. First, risk factor for policyholders is defined. Then sorts of premium are described and the credibility premium is introduced as a linear function of the past data. The simplest credibility model, the Buhlmann model, is shown. It is tryed to use for the determination of the amount of premium. The model example is solved with the use of mathematical and statistical methods.