Property-Liability Insurance Pricing Models: An Empirical Evaluation

Over the past two decades, several pricing models that integrate underwriting and investment performance have been proposed or utilized to determine property-liability insurance rates.In general, these models have been tested separately and only over a relatively limited time horizon.In this paper, the major property-liability insurance pricing models are evaluated over the sixty year period from 1926 through 1985 and the results of the various models are compared with each other in terms of the ability to predict actual underwriting profit margins.Differences between model predictions and the actual realized underwriting profit margin series are examined over the entire period as well as various subperiods in order to demonstrate how the individual models i perform under different conditions.The goal of this research is to assist actuaries and researchers in the application of the various pricing models and interpretation of results.