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Procedia
Engineering
Procedia Engineering
Procedia 00 (2011)
Engineering 000–000
15 (2011) 4973 – 4977
www.elsevier.com/locate/procedia

Advanced in Control Engineering and Information Science

Research on motor vehicle insurance underwriting risk

management model

chehui ∗1, a, zhangjiwu 2,b zhangxingyang3

123
shenyang aerospace university. liaoning Prov.110136, P.R.CHINA.
a
email cherry_740203@sina.com, bemail zxy86824@163.com,

Abstract

There are many risks in the proceeding of underwriting which affect the development of insurance.So,risk
management of underwriting of motor vehicle insurance plays the important role. First, underwriting risks
are analyzed by AHP. Secondly, this article discusses how to establish a scientific and practical model to
enhance the motor vehicle insurance underwriting risk management process.
© 2011 Published by Elsevier Ltd. Selection and/or peer-review under responsibility of [CEIS 2011]
Open access under CC BY-NC-ND license.
Keywords:risk management; Analytic hierarchy process (AHP); Motor vehicle insurance; Underwriting

With the deepening of China's reform opening-up and socialist market economy system established, the
motor vehicle insurance has become the important part of China's property insurance industry. However,
for a long time domestic insurance companies don’t take any measures of the risk management in the
underwritng. Along with the increase of the insurance market main body, information transparency
intensified and fair competition mechanism constantly improved, motor vehicle insurance quality
becomes a very important problem. Therefore using scientific theory means is very necessary to evaluate
the risk of insurance market.
1. The identification of motor vehicle risk
Risk identification is the foundation of risk management of motor vehicles ,which not only can identify
risks, but also effectively assess and treat risk. The so-called risk may be described as the uncertainty
associated with the possibility of loss qualitatively. From quantitative analysis angle, The so-called risk

∗
Corresponding author. Tel.:+8615640063292
E-mail address: cherry_740203@sina.com

1877-7058 © 2011 Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
doi:10.1016/j.proeng.2011.08.924
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may be described as expected results which lead to deviate from the possibility of loss. For motor
vehicles, motor vehicle accident caused factor is the risk, such as roads, driving time, weather conditions,
driver fatigue. China's motor vehicle insurance from the accident situation, the traffic occupies most of
the proportion of the main factors lead to traffic accidents is human, vehicle, environment.
2 .Underwriting of risk management
When risk factors for motor vehicle insurance identification are completed in the underwriting process,
risk evaluation in a motor vehicle occupies the most important position. Here we adopt a mathematical
model of the analytic hierarchy in order to evaluation the risks.
2.1 Established the mathematical model
In order to provide the underwriting advice , risk factors must be determined .At the same time, the
influence weights must be given. Expert scoring method is used to calculate the weight . Meanwhile
Analytic hierarchy process (AHP) is to be determine the weights of various factors.
2.1.1 Establishment of a comprehensive evaluation of each set of factors and sub factors evaluation
set
Driving safety under the influence of the major factors to establish a comprehensive set of evaluation
factors, namely, the criterion level, can be expressed as：
U=｛U1，U2，U3｝ Ui=｛Ui1，Ui2，Ui3,……,Uin｝ (1)
2.1.2 Determine their respective weights
Using AHP to identify the weights of the factors
Rule layer
Factors U1 U2 U3..... Ui
Weights W1 W2 W3..... Wi
s
Among them 0≤Wi≤1 ∑
i =1
wi = 1 (2)

Index level
Factors Ui1 Ui2 Ui3...... Uin
Weights Wi1 Wi2 Wi3...... Win
s n
Among them 0≤Wij≤1 ∑ ∑ wij =1 i=1,2,3,...s j=1,2,3,...n (3)
i =1 j =1

2.1.3 Establishment of the alternative set

Evaluation of alternative set is the evaluation of risk factors may have affected the size of the set, can be
expressed as:
V=｛V1，V2,……, Vm｝ (4)
2.1.4 Establishment of single factor evaluate on matrix
According to established alternative set, a number of experts on evaluation to assess the state of the
object, thus establishing the single factor evaluation matrix. Suppose there are N experts to participate in
evaluation, the uij are divided into five levels, the results shown in the following table:
Table 1 determine the fuzzy membership
Level very large large General Small Very small Total
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Judgement Number n1 n2 n3 n4 n5 N
rij n1/N n2/N n3/N n4/N n5/N 1.00

rij represents the i-j-element is rated as the membership grades to now have constituted the single factor
evaluation matrix Ri, can be expressed as:

⎡ r11 r12 ... r15 ⎤

⎢r r22 ... r25 ⎥
Ri= ⎢ ⎥
21
(5)
⎢ ... ... ... ... ⎥
⎢ ⎥
⎣rm1 rm 2 ... rm 5 ⎦
2.1.5The fuzzy comprehensive evaluation
Based on the use of AHP as determined by the weight of the evaluation factors, the first level, said the
comprehensive evaluation are as follows:
Bi=Ai*Ri=(bi1 ,bi2,bi3.....bim) i=1,2,3,4……s (6)

Comprehensive Evaluation of the two, said as follows:

As each element of a ui with Bi as its single factor assessment, can constitute evaluation matrix:

⎡ B1 ⎤ ⎡b11 b12 ... b1m ⎤

⎢ B ⎥ ⎢b b22 ... b2 m ⎥⎥
R= ⎢ ⎥ = ⎢
2 21
(7)
⎢... ⎥ ⎢ ... ... ... ... ⎥
⎢ ⎥ ⎢ ⎥
⎣ Bs ⎦ ⎣bs1 bs 2 ... bsm ⎦

The second stage of the comprehensive evaluation results:

B=A*R (8)
2.2 Using AHP method to calculate the weight of each risk factor
2.2.1 A multi-level hierarchical structure model
Table2. the factors in front by a multi-level rating system, the structure below:
Rule layer（U） Evaluation factor（u）

Sex（u11）

Age（u12）

Character（u13）
Human（U1）
Habits（u14）

Technology（u15）
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Hobby（u16）

Daily driving time（u17）

Speed（u18）

Loss record（u19）

Health（u10）

Type of vehicle（u21）

Vehicle condition（u22）
Car（U2）
The main purpose（u23）

Parking Place（u24）

Mileage（u25）

Use of time（u26）

Additional safety facilities（u27）

Geographical characteristics（U31）
Environment（U3） Traffic characteristics（U32）

Climate characteristics（U33）

2.2.2 According to the judgment matrix for weights

Weight can be calculated and integrated with the square root method or the method, the accuracy of the
two equivalent square root method algorithm is simple, so the square root method based on:
(1)Mi and Wi are calculated
n
Mi= ∏ aij i=1,2,...n (9)
j =1

⎛ n ⎞ 1/n
⎜ ∏ aj ⎟
Wi= ⎜ ⎟ i=1,2,…,n (10)
⎝ j =1 ⎠
3.Application of the model
Evaluation factor will be divided into five grades according to size: very large, large, general, small, very
small. The evaluation set:
Vi=｛very large, large, general, small, very small｝
We choose an car which has been using a 3-year driving and 20,000 km, the car driver is a four-year-old
married middle-aged man who driving 15-year record of no loss in late three years.. He has some
characters such as poise, smoking, drinking habits, good physical condition,
According to the results of single-level evaluation B=A*R
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⎡b1 ⎤
B=(0.682 0.236 0.082)* ⎢ ⎥ ==(0.2302 0.5787 0.3269 0.0220 0.0019) (11)
b
⎢ 2⎥
⎢⎣b3 ⎥⎦

m
S=B*W=(b1，b2……bn)(w1，w2……wm)，= ∑
j =1
b j w j =85.3035 (12)

So the car is required to develop the subject of insurance coverage.

Conclusion: The people, vehicles, and environmental factors must be considered in the process of the
underwriting process which can effectively prevent the acts of the insured occurrence of adverse
selection, moral hazard can be controlled. At the same time by building models, based on assessment of
professional and technical personnel, motor vehicle insurance can have a quantitative, more scientific, the
real description .The insurance company can take appropriate measures to control the risks, insurance
companies may adjust rates or otherwise be covered. So, it is very important and urgent to establish a
scientific and practical model to enhance the motor vehicle insurance underwriting risk management
process.

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