Applications of a multi-state risk factor/mortality model in life insurance |
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Authors: | Hyuk-Sung Kwon |
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Institution: | a Department of Statistics and Actuarial Science, Soongsil University, Republic of Korea b Department of Statistical and Actuarial Sciences, University of Western Ontario, London, Ontario N6A 5B7, Canada |
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Abstract: | Mortality rates are known to depend on socio-economic and behavioral risk factors, and actuarial calculations for life insurance policies usually reflect this. It is typically assumed, however, that these risk factors are observed only at policy issue, and the impact of changes that occur later is not considered. In this paper, we present a discrete-time, multi-state model for risk factor changes and mortality. It allows one to more accurately describe mortality dynamics and quantify variability in mortality. This model is extended to reflect health status and then used to analyze the impact of selective lapsation of life insurance policies and to predict mortality under reentry term insurance. |
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Keywords: | Health status Life insurance Markov chain Mortality Multi-state model Risk factors Reentry term Selective lapsation |
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