Department of Statistics, Faculty of Science, Bu-Ali Sina University
Abstract
In actuarial studies, insurance losses are treated as random variables, and researchers seek appropriate probabilistic models to represent them. Since losses are evaluated in terms of a unity amount, distributions with positive support are typically used to model them. While this poses no issue for univariate cases, it becomes more complicated in multivariate scenarios. While copulas can be helpful in such situations, studying correlation is a crucial initial step. The Pearson correlation coefficient, widely used in statistical analysis, measures the strength and direction of the linear relationship between two variables. Furthermore, we analyze a real-world dataset from an Iranian insurance company, including losses due to physical damage and bodily injury, as covered by third-party liability insurance. Upper and lower limits for both the Pearson correlation coefficient and its estimator were derived from the analysis. Furthermore, two methodswereusedtodeterminethecorrelation between physical damage and bodily injury, and then the results were compared. Instead, our analysis reveals that narrower bounds can be established for the Pearson correlation coefficient in such cases. The results of this study provide important insights into modeling insurance losses in multivariate cases and have practical implications for risk management and pricing decisions in the insurance industry.
Mahmoudvand, R. (2023). Exploring limits for the Pearson Correlation Coefficient and
its Application for Study of Insurance Losses. Andishe_ye Amari, 28(1), 125-132.
MLA
Mahmoudvand, R. "Exploring limits for the Pearson Correlation Coefficient and
its Application for Study of Insurance Losses", Andishe_ye Amari, 28, 1, 2023, 125-132.
HARVARD
Mahmoudvand R. (2023). 'Exploring limits for the Pearson Correlation Coefficient and
its Application for Study of Insurance Losses', Andishe_ye Amari, 28(1), pp. 125-132.
CHICAGO
R. Mahmoudvand, "Exploring limits for the Pearson Correlation Coefficient and
its Application for Study of Insurance Losses," Andishe_ye Amari, 28 1 (2023): 125-132,
VANCOUVER
Mahmoudvand R. Exploring limits for the Pearson Correlation Coefficient and
its Application for Study of Insurance Losses. Andishe_ye Amari. 2023;28(1):125-132 (In Persian).