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Premiums for Long-Term Care Insurance Packages: Sensitivity with Respect to Biometric Assumptions


  • Ermanno Pitacco

    () (Department DEAMS “Bruno de Finetti”, University of Trieste, Piazzale Europa 1, Trieste 34127, Italy)


Long-term care insurance (LTCI) covers are rather recent products, in the framework of health insurance. It follows that specific biometric data are scanty; pricing and reserving problems then arise because of difficulties in the choice of appropriate technical bases. Different benefit structures imply different sensitivity degrees with respect to changes in biometric assumptions. Hence, an accurate sensitivity analysis can help in designing LTCI products and, in particular, in comparing stand-alone products to combined products, i.e. , packages including LTCI benefits and other lifetime-related benefits. Numerical examples show, in particular, that the stand-alone cover is much riskier than all of the LTCI combined products that we have considered. As a consequence, the LTCI stand-alone cover is a highly “absorbing” product as regards capital requirements for solvency purposes.

Suggested Citation

  • Ermanno Pitacco, 2016. "Premiums for Long-Term Care Insurance Packages: Sensitivity with Respect to Biometric Assumptions," Risks, MDPI, Open Access Journal, vol. 4(1), pages 1-22, February.
  • Handle: RePEc:gam:jrisks:v:4:y:2016:i:1:p:3-:d:64203

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    References listed on IDEAS

    1. Zhou-Richter, Tian & Gründl, Helmut, 2011. "Life care annuities: Trick or treat for insurance companies?," ICIR Working Paper Series 04/11, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    2. Jason Brown & Mark Warshawsky, 2013. "The Life Care Annuity: A New Empirical Examination of an Insurance Innovation That Addresses Problems in the Markets for Life Annuities and Long-Term Care Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(3), pages 677-704, September.
    3. Warshawsky, Mark J., 2012. "Retirement Income: Risks and Strategies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016931, March.
    4. Gregorius, F. K., 1993. "Disability insurance in The Netherlands," Insurance: Mathematics and Economics, Elsevier, vol. 13(2), pages 101-116, November.
    5. Rickayzen, B.D. & Walsh, D.E.P., 2002. "A Multi-State Model of Disability for the United Kingdom: Implications for Future Need for Long-Term Care for the Elderly," British Actuarial Journal, Cambridge University Press, vol. 8(02), pages 341-393, June.
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    1. repec:gam:jrisks:v:6:y:2018:i:1:p:13-:d:133289 is not listed on IDEAS

    More about this item


    long-term care insurance; LTCI; biometric functions; multi-state models; Markov models; mortality laws; mortality of disabled people;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • K2 - Law and Economics - - Regulation and Business Law


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