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Discrete time Non-homogeneous Semi-Markov Processes applied to Models for Disability Insurance

Author

Listed:
  • Guglielmo D’Amico

    (Dipartimento di Scienze del Farmaco, Università G. D’Annunzio of Chieti-Pescara, Chieti, Italy)

  • Montserrat Guillen

    (Departament d’Econometria, Estadistica I Economia Espanyola, RFA-IREA, Universitat de Barcelona, Spain)

  • Raimondo Manca

    (Dipartimento di Metodi e Modelli per l’Economia, il Territorio e la Finanza, Università La Sapienza di Roma, Roma, Italy)

Abstract

In this paper, we present a stochastic model for disability insurance contracts. The model is based on a discrete time non-homogeneous semi-Markov process (DTNHSMP) to which the backward recurrence time process is introduced. This permits a more exhaustive study of disability evolution and a more efficient approach to the duration problem. The use of semi-Markov reward processes facilitates the possibility of deriving equations of the prospective and retrospective mathematical reserves. The model is applied to a sample of contracts drawn at random from a mutual insurance company.

Suggested Citation

  • Guglielmo D’Amico & Montserrat Guillen & Raimondo Manca, 2012. "Discrete time Non-homogeneous Semi-Markov Processes applied to Models for Disability Insurance," Working Papers XREAP2012-05, Xarxa de Referència en Economia Aplicada (XREAP), revised Mar 2012.
    • Handle: RePEc:xrp:wpaper:xreap2012-05
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    References listed on IDEAS

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    1. Antonio Manresa & Ferran Sancho, 2012. "Leontief versus Ghosh: two faces of the same coin," Working Papers XREAP2012-18, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2012.

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