The effect of model uncertainty on the pricing of critical illness insurance
The effect of model uncertainty on the pricing of critical illness insurance
In this paper we calculate and compare diagnosis and net premium rates for critical illness insurance using different models for the claim delay distribution (CDD). The choice of CDD affects the diagnosis rates and hence the net premium rates in two ways: through the estimation of missing dates of diagnosis and through the adjustment of the exposure to allow for claims diagnosed but not settled in the observation period. We consider two CDDs: a three-parameter Burr distribution and a lognormal distribution. Our conclusion, based on a single, but extensive, data set, is that net premium rates are not significantly affected by the choice of CDD
108-133
(Ozkok) Dodd, Erengul
b3faed76-f22b-4928-a922-7f0b8439030d
Streftaris, George
c183b8ea-cf3f-4f5c-8266-b4486b458792
Waters, Howard R.
4e0e6216-6ea1-4034-91b3-0224f00c0ad8
Stott, Andrew D.
4e2503ff-d92d-4e32-97f3-b5f56e3ece64
1 March 2015
(Ozkok) Dodd, Erengul
b3faed76-f22b-4928-a922-7f0b8439030d
Streftaris, George
c183b8ea-cf3f-4f5c-8266-b4486b458792
Waters, Howard R.
4e0e6216-6ea1-4034-91b3-0224f00c0ad8
Stott, Andrew D.
4e2503ff-d92d-4e32-97f3-b5f56e3ece64
(Ozkok) Dodd, Erengul, Streftaris, George, Waters, Howard R. and Stott, Andrew D.
(2015)
The effect of model uncertainty on the pricing of critical illness insurance.
Annals of Actuarial Science, 9 (1), .
(doi:10.1017/S1748499514000244).
Abstract
In this paper we calculate and compare diagnosis and net premium rates for critical illness insurance using different models for the claim delay distribution (CDD). The choice of CDD affects the diagnosis rates and hence the net premium rates in two ways: through the estimation of missing dates of diagnosis and through the adjustment of the exposure to allow for claims diagnosed but not settled in the observation period. We consider two CDDs: a three-parameter Burr distribution and a lognormal distribution. Our conclusion, based on a single, but extensive, data set, is that net premium rates are not significantly affected by the choice of CDD
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e-pub ahead of print date: 23 October 2014
Published date: 1 March 2015
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Local EPrints ID: 372271
URI: http://eprints.soton.ac.uk/id/eprint/372271
ISSN: 1748-4995
PURE UUID: f182677e-243e-4789-938f-3e0dccfc5b29
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Date deposited: 12 Mar 2015 09:40
Last modified: 15 Mar 2024 03:49
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Author:
George Streftaris
Author:
Howard R. Waters
Author:
Andrew D. Stott
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