The truncated Schröter recursive algorithm for the computation of aggregate claim amounts

Friday I.  Agu

doi:https://doi.org/10.59139/stattrans-2025-041

The truncated Schröter recursive algorithm for the computation of aggregate claim amounts

Friday I. Agu Mathematical Institute, Slovak Academy of Sciences, Bratislava, Slovakia & Department of Sensory Information Systems and Technologies, Institute of Informatics, Slovak Academy of Sciences, Bratislava, Slovakia ORCID:https://orcid.org/0000-0002-2367-4732 Statistics in Transition new series, vol. 26, 2025, 4, pages: 89-110 Published online: 5 December 2025 https://doi.org/10.59139/stattrans-2025-041 Citation: Agu F. I., 2025. The truncated Schröter recursive algorithm for the computation of aggregate claim amounts. Statistics in Transition new series, 26(4), pp. 89-110 https://doi.org/10.59139/stattrans-2025-041

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ABSTRACT

This study introduces and evaluates the truncated Schröter recursive algorithm for computing aggregate claim amounts in the insurance sector. The algorithm addresses the limitations in the existing methods by incorporating truncation at 1, which is crucial for an accurate modelling of insurance claims where the events leading to a claim are pivotal. Using the AutoCollision dataset, the study compares the truncated Schröter algorithm with the Panjer and Schröter recursion algorithms, focusing on computational efficiency and accuracy. Furthermore, the descriptive statistics revealed substantial variability and risk factors, such as higher claim severity for business-use vehicles and young drivers aged 17–20. The results demonstrate that the truncated Schröter algorithm substantially reduces the execution time while maintaining high accuracy, thus making it a superior tool for risk management and premium setting.

KEYWORDS

insurance claim amounts, aggregate claim distribution, recursive algorithm, insurance risk management, computational efficiency

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