Flashcards in Chapter 15 Demographic assumptions Deck (11):
The process of determining demographic assumption entails:
-Collecting appropriate data
-grouping the data
-calculating the rates
-adjusting the rates
Collecting the appropriate data
-data would relate to an appropriate period of year, such that volume is adequate,
-but excessive heterogeneity due to changes over time is not introduced
Grouping the data
-divide data into relevant homogenous groups
-subject to adequate levels of data in each cell
-in some cases rates will be based on an adjustment to a standard table,
-others to exposed to risk techniques may be used
Adjusting the rates
-adjustments are made if a class of lives are expected to have experience different to that which observed from the data.
-this could occur due to a change in the target market or distribution channel.
-in most cases morbidity, mortality parameters will be based on an adjustment to rates from a standard table.
Determining claims incidence rates and recovery rates
-Insurer's own data is likely to be most relevant source of data
-data should be grouped into homogenous groups subject to credibility
-legislation may restrict use of certain factors.
-Allowance should be made for trends. Key social & economic influences include:
-changing attitudes to health
-economic situation/wellbeing of the country
-high inflation will impact renewal premiums
-medical advance should be allowed for in the rates.
-claim amount assumptions are important for indemnity cover.
-Claim recovery rates are important under LTCI benefit will cease if policyholder recovers form sickness.
How are claims incidence rates derive for LTCI, CI, PMI ? eg separate rates vary by?
-single rates will be derived for LTCI
-Separate rates for different illnes for CI insurance eg heart attack, cancer, stroke, TPD, etc
-combining these separate rates is not appropriate for tiered benefits
-different claim incidence rates for different treatments for PMI.
What factors are typically used for long-term health & care?
-size of benefit selected
-class of product
-individual or group
formula for calculating incident rates:CI
i(x,t,j) = a(t,j)*i(x,j,0)
where a is the t-year projection factor for disease j.
Demographic assumptions: Mortality
-Mortality rates should be taken from recent experience of a credible body of policyholder for same contract.
-The process of deriving mortality assumptions is similar to that of deriving claim incidence and recovery rates.
-Mortality rates are important for:
-claims in payment under LTCI
-for accelerated CI insurance
-within the survival period for stand-alone CI insurance
-For claims in payment, the mortality assumption is less important pre-claim, unless a significant death benefit is provided.