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A Multiple State Model for Premium Calculation when Several Premium-Paid States are Involved

Author

Listed:
  • Joanna Dębicka

    (Wrocław University of Economics)

  • Beata Zmyślona

    (Wrocław University of Economics)

Abstract

The aim of this contribution is to derive a general matrix formula for the netperiod premium paid in more than one state. In order to avoid "overpayment" which implies higher premiums we give a formula for replacement of lump sum benefit into annuity benefits paid in more than one state. The obtained result is useful for example to more advanced models of dread disease insurances allowing period premiums paid by both healthy and ill person (e.g. not terminally yet). As an application, we supply analysis of dread disease insurances against the risk of lung cancer based on the actual data for the Lower Silesian Voivodship in Poland.

Suggested Citation

  • Joanna Dębicka & Beata Zmyślona, 2018. "A Multiple State Model for Premium Calculation when Several Premium-Paid States are Involved," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 10(1), pages 27-52, March.
    • Handle: RePEc:psc:journl:v:10:y:2018:i:1:p:27-52
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    More about this item

    Keywords

    modified multiple state model; net premium; life annuity; criticalillness insurance; accelerated death benefits;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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