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A multistate approach to disability insurance reserving with information delays

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  • Oliver Lunding Sandqvist

Abstract

Disability insurance claims are often affected by lengthy reporting delays and adjudication processes. The classic multistate life insurance modeling framework is ill-suited to handle such information delays since the cash flow and available information can no longer be based on the biometric multistate process determining the contractual payments. We propose a new individual reserving model for disability insurance schemes which describes the claim evolution in real-time. Under suitable independence assumptions between the available information and the underlying biometric multistate process, we show that these new reserves may be calculated as natural modifications of the classic reserves. We propose suitable parametric estimators for the model constituents and a real data application shows the practical relevance of our concepts and results.

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  • Oliver Lunding Sandqvist, 2023. "A multistate approach to disability insurance reserving with information delays," Papers 2312.14324, arXiv.org.
    • Handle: RePEc:arx:papers:2312.14324
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    References listed on IDEAS

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    1. Crevecoeur, Jonas & Antonio, Katrien & Verbelen, Roel, 2019. "Modeling the number of hidden events subject to observation delay," European Journal of Operational Research, Elsevier, vol. 277(3), pages 930-944.
    2. Crevecoeur, Jonas & Robben, Jens & Antonio, Katrien, 2022. "A hierarchical reserving model for reported non-life insurance claims," Insurance: Mathematics and Economics, Elsevier, vol. 104(C), pages 158-184.
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    12. Norberg, Ragnar, 1993. "Prediction of Outstanding Liabilities in Non-Life Insurance1," ASTIN Bulletin, Cambridge University Press, vol. 23(1), pages 95-115, May.
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