Wang’s premium principle: overview and comparison with classical principles

Abstract

A premium principle is an economic assessment regulation used by the insurer in order to settle on the amount of net premium for each individual risk in his portfolio. In this research, we will practically examine the performance, by comparing with other principles, of Wang’s (1996) proposed premium principle based on transforming the premium layer density. Theoretically, Wang’s principle is the best premium principle among all existing premium calculation principles as it satisfies most of the properties of a premium principle.