A course in credibility and its applications

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Credibility theory has long been a focal point of interest, leading to numerous publications and over 20 years of teaching courses on the subject. This evolution culminates in the presentation of “A Course in Credibility Theory and its Applications.” Credibility theory serves as a foundational paradigm for pricing insurance products, relying on the concepts of “individual risk” and “collective” to rigorously analyze information from these sources to determine insurance premiums. The term “credibility” originally referred to the weight assigned to individual risk experience. As a mathematical discipline, credibility theory integrates methods from various fields, including Bayesian statistics, Hilbert space techniques, least squares, and state space modeling. However, it remains a dry topic unless closely tied to real-world applications. These applications have solidified credibility's significance in insurance practice. This book aims to highlight both the theoretical and practical aspects of credibility, making it accessible to readers, including those outside the insurance field, while conveying the relevance of its applications in the industry.