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Alyafie, Asrar, Corina Constantinescu, and Jorge Yslas. 2023. “An Analysis of the Current Saudi Arabian No-Claim Discount System and Its Adaptability For Novice Women Drivers.” CAS E-Forum Spring (May).
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  • Figure 1. Number of car licenses for women in Saudi Arabia
  • Table 1. The Saudi no-claim discount system
  • Table 2. Saudi bonus-malus system (third-party)
  • Figure 2. Transition diagram of Saudi BMS
  • Figure 3. Total variation for Saudi, Malaysian and Brazilian BMSs
  • Table 3. Total variation for Saudi, Malaysian and Brazilian BMSs after \(n\) transitions
  • Figure 4. Rate of convergence for Saudi and Brazilian BMSs
  • Figure 5. Evolution of mean premium level of the Saudi, Malaysian and Brazilian BMSs
  • Figure 6. Asymptotic relativity of the Saudi, Malaysian and Brazilian BMSs as a function of the claim frequency
  • Figure 7. Elasticity of Saudi, Malaysian and Brazilian BMSs
  • Figure 8. Total variation of Saudi BMS for different claim frequencies
  • Figure 9. Evolution of mean premium level for different values of the claim frequency
  • Table 4. Claim frequency from \(\lambda_{ini} = 0.15\) to \(\lambda_{end} = 0.075\) in 3 years
  • Figure 10. Total variation of Saudi BMS when considering improvements on the claim frequencies
  • Table 5. Total and additional years to convergence of the Saudi BMS for scenarios with improvements in the claim frequency
  • Table 6. Malaysian BMS (+1/Bottom)
  • Table 7. Brazilian BMS (+1/-1)


This paper analyzes the existing car insurance ratemaking system in Saudi Arabia, with the goal of assessing its readiness for novice women drivers allowed to drive only four years ago (starting June 2018). Saudi Arabia has an a posteriori ratemaking system to set the premium for the next contract period based on the policyholder’s claim history. Concretely, it rewards drivers with no claims, and therefore, it is often referred to as a non-claim discount (NCD) system. We set to analyze the system’s efficiency by transforming the current rules established by the Saudi Arabian Monetary Agency into a 6-class premium rate system. Since Malaysia and Brazil have ratemaking systems with a similar number of classes, we compare the efficiency of the three systems. By evaluating convergence to steady-state, average premium level charged, and elasticity, we conclude that the Saudi Arabian one is the slowest to reach a steady-state, charges the highest average premium to new policyholders relative to drivers with a long history in the system, but is relatively elastic. All of these lead us to conclude that the current Saudi NCD system is financially imbalanced and does not achieve fairness (quickly) among the insured drivers, an essential feature for the new generation of women drivers. Furthermore, based on claim data from Allied Cooperative Insurance Group, we conclude that there is still insufficient information to fully describe the driving pattern of these novice drivers. Hence, we consider some possible scenarios/behaviors for the new generation of women drivers, which confirm our conclusion.

Accepted: April 26, 2023 EDT