Automobile Collision Deductibles and Repair Cost Groups: The Lognormal Model [Discussion]

In this paper Mr. Bickerstaff presents a proposed ratemaking procedure for automobile collision insurance which incorporates two concepts not currently reflected in the standard ratemaking techniques on which we will comment in this review. The first is the reflection of the physical characteristics of vehicles in terms of their “damageability” and “reparability”. That is, their relative susceptibility to damage given a certain collision situation and their relative cost of repair parts and labor given a certain degree of damage. The second is the use of the lognormal distribution as a model for the distribution by size of automobile collision claims and the use of this model to determine the relationships between the rates for different deductibles.