Updating mechanism for lifelong insurance contracts subject to medical inflation

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

Research output: Contribution to journalArticleResearchpeer-review

5 Citations (Scopus)

Abstract

This paper proposes a practical way for indexing level premiums in lifelong medical insurance contracts, in order to take into account observed medical inflation. The 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 mutual and shareholder insurers do not compute contract-specific reserves, managing the whole portfolio in a collective way. Note that the similarity with the existing literature on life insurance comes from the lifelong nature of the contracts considered in our setting. However, in the case of health insurance covers the value of future benefits is random. 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.

Original languageEnglish
Pages (from-to)133-163
Number of pages31
JournalEuropean Actuarial Journal
Volume7
DOIs
Publication statusPublished - 2017
Externally publishedYes

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