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Updating mechanism for lifelong insurance contracts subject to medical inflation

Author

Listed:
  • Michel Denuit
  • Jan Dhaene
  • Hamza Hanbali
  • Nathalie Lucas
  • Julien Trufin

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.

Suggested Citation

  • Michel Denuit & Jan Dhaene & Hamza Hanbali & Nathalie Lucas & Julien Trufin, 2016. "Updating mechanism for lifelong insurance contracts subject to medical inflation," Working Papers Department of Accountancy, Finance and Insurance (AFI), Leuven 544624, KU Leuven, Faculty of Economics and Business (FEB), Department of Accountancy, Finance and Insurance (AFI), Leuven.
    • Handle: RePEc:ete:afiper:544624
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    File URL: https://lirias.kuleuven.be/retrieve/393514
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    Cited by:

    1. 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.
    2. 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.

    More about this item

    Keywords

    health insurance; reserving; inflation; premium update; solvency evaluation;
    All these keywords.

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