Pricing Health & Care Contracts (28)

Question 1

Costing IP approaches (2)

Answer 1

1. Multi-state model
2. Claim inception & disability annuity

Question 2

Multi-state Modelling

Answer 2

Stages
– healthy premium paying
– sick with deferral period
– claimant after deferral
– recovery + premium paying
– dead

Need:
– Forces of transition (intensities) btw stages
– Project transition probabilities
– Leads to sub-cohorts

Superior for sensitivity testing

Question 3

Inception & disabled life annuity approach

Answer 3

Simplified multi-state

{ survival probability } x { claim inception rate } x { annuity disability }

– producing mid-year values
– discount to get beginning of year

Five components
1. survival probability
2. claim inception rate
3. value of annuity payable
4. discount factor
5. annual benefit amount

Question 4

Disabled annuity

Answer 4

Base off of double decrement
– recovery
– death

Only current claims only

Question 5

Claim inception rate

Answer 5

Sickness inception rate x P(sick lives surviving sick deferral period)

1. initial claim inception rate: ix,d
2. central claim inception rate: (ia)x,d
3. central claim inception rate: (ib)x,d

Question 6

Disabled life annuities

Answer 6

1. current benefit
2. during sickness, currently healthy

Question 7

Critical illness

Answer 7

critical illness claim incidence rate = ix * { probability of surviving survival period}

Accelerated critical illness claim incidence rate = ix + (1 - kx)*qx