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1 results

  • Premium control with reinforcement learning

  • Lina Palmborg, Filip Lindskog
  • Journal:
    ASTIN Bulletin: The Journal of the IAA / Volume 53 / Issue 2 / May 2023
    Published online by Cambridge University Press:
    11 April 2023, pp. 233-257
    Print publication:
    May 2023
    • Article
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  • We consider a premium control problem in discrete time, formulated in terms of a Markov decision process. In a simplified setting, the optimal premium rule can be derived with dynamic programming methods. However, these classical methods are not feasible in a more realistic setting due to the dimension of the state space and lack of explicit expressions for transition probabilities. We explore reinforcement learning techniques, using function approximation, to solve the premium control problem for realistic stochastic models. We illustrate the appropriateness of the approximate optimal premium rule compared with the true optimal premium rule in a simplified setting and further demonstrate that the approximate optimal premium rule outperforms benchmark rules in more realistic settings where classical approaches fail.