Abstract:
Loss distribution plays an influential role in evaluating risks from policyhold ers’ claims. Nevertheless, the auto insurance market in Ghana pays little at tention to policyholders’ claims distribution, resulting in the market’s ineffi ciency. This study investigates the type of loss distribution function that best
approximates policyholders’ claims in Ghana. We applied the Kullback-Leibler
divergence, Kolmogorov Smirnov, Anderson-Darling statistical tests and max imum likelihood estimation (MLE) to estimate policyholders’ claims. The re sults suggest that Ghana’s auto policyholder’s claims are better approximated
using the lognormal probability distribution. Through the lognormal distribu tion, the industry can adequately evaluate policyholders’ claims to minimize
potential loss. Additionally, this distribution could enable the market reach
decisions on premiums and expected profits theoretically
