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Private long term care insurance: Theoretical approach and results applied to the Spanish case

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Author Info

  • Pablo Alonso González

    ()
    (Departamento de Economía, Universidad de Alcalá.)

  • Irene Albarrán Lozano

    (Departamento de Estadística, Universidad Carlos III de Madrid.)

Abstract

The passing of the Law 39/2006 has given to Spanish insurance companies the chance of offering products that cover the expenses associated to the risk of dependence. However, due to the lack of reliable statistic information about dependent population, it is extremely difficult to evaluate not only the frequency but also the cost. These two items make the pricing process with a big cloud of uncertainty. This paper proposes a methodology for premium calculation taking into account not only the availability of the data but also the current legal framework in Spain. Together to the theoretical approach, premium calculations for two possible versions are included. Finally, it is introduced a simulation model that pretends to evaluate the impact that a portfolio with these kind of contracts would have on the solvency of an insurance company.

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File URL: http://dspace.uah.es/dspace/bitstream/handle/10017/3323/Alcamentos0902.pdf
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Bibliographic Info

Paper provided by Universidad de Alcalá, Departamento de Economía. in its series Alcamentos with number 0902.

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Length: pages 40
Date of creation: 2009
Date of revision:
Handle: RePEc:alc:alcamo:0902

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Keywords: Long term care insurance; pricing; multi-state model; simulation; solvency;

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  1. Gregorius, F. K., 1993. "Disability insurance in The Netherlands," Insurance: Mathematics and Economics, Elsevier, vol. 13(2), pages 101-116, November.
  2. Levikson, B. & Mizrahi, G., 1994. "Pricing long term care insurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 14(1), pages 1-18, April.
  3. Pitacco, Ermanno, 1995. "Actuarial models for pricing disability benefits: Towards a unifying approach," Insurance: Mathematics and Economics, Elsevier, vol. 16(1), pages 39-62, April.
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