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Updating mechanism for lifelong insurance contracts subject to medical inflation

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  • Denuit, Michel
  • Dhaene, Jan
  • Hanbali, Hamza
  • Lucas, Nathalie
  • Trufin, Julien

Abstract

This paper proposes a practical way for ex-post indexing of level premiums in lifelong medical insurance contracts, in order to take into account observed medical inflation. We show that ex-post indexing can be achieved by considering only premiums, without explicit reference to reserves. This appears to be relevant in practice as reserving mechanisms may not be transparent to policyholders and as some insurers do not compute contract-specific reserves, managing the whole portfolio in a collective way. The present study originates from a proposal for indexing lifelong medical insurance level premiums in Belgium. As an application, we study the impact of various indexing mechanisms on a typical medical insurance portfolio on the Belgian market.
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Suggested Citation

  • Denuit, Michel & Dhaene, Jan & Hanbali, Hamza & Lucas, Nathalie & Trufin, Julien, 2017. "Updating mechanism for lifelong insurance contracts subject to medical inflation," LIDAM Reprints ISBA 2017018, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2017018
    Note: In : European Actuarial Journal, vol. 7, no.1, p. 133-163 (2017)
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    Cited by:

    1. Hanbali, Hamza & Claassens, Hubert & Denuit, Michel & Dhaene, Jan & Trufin, Julien, 2019. "Once covered, forever covered: The actuarial challenges of the Belgian private health insurance system," Health Policy, Elsevier, vol. 123(10), pages 970-975.
    2. Hanbali, Hamza & Denuit, Michel & Dhaene, Jan & Trufin, Julien, 2019. "A dynamic equivalence principle for systematic longevity risk management," Insurance: Mathematics and Economics, Elsevier, vol. 86(C), pages 158-167.

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