Loss distributions for motor insurance claim severity in Kenya

Abstract

The insurance industry is one of the oldest industries. Insurance companies exist to provide indemnity and make profits since insurance is a business like any other. The advancement of the insurance market is compelled by the prevailing interest of the public for cover against different forms of risks of tmacceptable arbitrary incidents with a considerable financial effect (Omari et al., 2018). A policyholder is supposed to pay a premium and make a claim when a certain event occurs witllin a given period as per the policy. The insurer is tl1en obliged to settle the claim, and this is referred to as loss. Insurers are keen with the results oftl1e random outcome of claims instead of the existence of the claims. They are concerned with the loss rather than the circumstances that give rise to the loss (Achieng, 2010). The aggregate amount of claims in a given dmation is a measure that is vital to the operations of an insurance company.