Research On Pricing Methods For Disability Income Insurance

Disability income insurance is a kind of health insurance. In North American and Europe, developed more than 100 years, disability income insurance has been more and more perfect, but in China, disability income insurance products can hardly be found in insurance market. With the development of society and improvement of people's insurance consciousness, disability income insurance has great market potential and prospective future in our country. Developing disability income insurance products is an important approach for insurance company to explore market innovatively. It's important and valuable to make a study on the pricing of disability income insurance products.This dissertation introduces the definition of disability insurance, the character of disability income insurance and the factors of pricing for disability income insurance. Based on these, it introduces Multi-Markov model and semi-Markov model. According to many predecessors'research, the pricing methods of disability income insurance can be classified in three kinds: Decrement-Increment Tables Method, Manchester Union method and Multi-states Method. It analyses the relationships between transition probabilities and transition intensities in Markov and Semi-Markov models, and discusses the payable probabilities.This dissertation includes six parts:Part one: The definition of disability income insurance , the character of disability income insurance. In this part, based on the analysis of"disability"and the field of disability income insurance, the disability income insurance can be defined as: disability income insurance is a kind of health insurance, it provides income loss compensation for the insurant when insurant's income reduced because of the disability caused by injury and illness. In order to discuss the pricing method, the character of disability income insurance products has been analyzed.Part two: The factors of pricing for disability income insurance and the theoretic model. In this part, the dissertation analyzes the factors which would influence the pricing, these factors are: transition probability and transition intensities, disability inception rate and disability occurrence rate, illness occurrence rate, interest rate, fares, statistical data, dividend, waiting period, disability duration dependence, etc. And It sets a three-states model which is the base of pricing methods.Part three: Increment-Decrement Tables Method. In this part, the construction of decrement-Increment Tables has been introduced. The bases of Increment-Decrement are three equations: flow equations, orientation equations and integration equations. Here we can see how to get these equations, and how to use statistic data to construct Increment-Decrement Tables. The second section of this part, it introduces the application of Increment-Decrement Tables. In this section, we can find how to use Increment-Decrement tables to determine the transition probabilities and transition intensities. If we know the transition intensities, we also can construct the Increment-Decrement tables.Part four: Manchester Union method. The difference between Manchester Union Method and other pricing method is the estimation of transition intensities and transition probabilities. In this part, it introduces a typical estimation of transition probability of Manchester Union Method, and selects some available data to calculate net premium of disability income insurance. It also analyzes the defects of Manchester Union Method.Part five: Multi-states Method. In this part, the dissertation introduces the three-states Markov model and Simi-Markov model, and discusses the he relationships between transition probabilities and transition intensities in Markov and Semi-Markov models. According to the estimation of transition intensities and policy condition, the article discusses some models, such as Norwegian model, Swedish model and inception-annuity model. In the thirdly section of this part, supposed the transition intensities are invariable, it discusses the transition probabilities and net premium calculation method. In the fourth section of this part, select-ultimate Markov method was constructed.Part six: Conclusions. In this part, the dissertation makes the comparisons between the methods, and it points out the advantages and disadvantages of the methods. It also gives some advices to use these method to price for disability income insurance.The contributions of this dissertation are:1. It is the first time to study the pricing methods of disability income insurance in our country, this research filled the theory blankness of this field.2. This dissertation gives the definition of the disability income insurance, and analyzes the character of disability income insurance products. These are the bases of pricing.3. This dissertation analyzes the factor of pricing for disability income insurance, this can give some direction to application of pricing.4. Based on three-states model, the dissertation expatiated the pricing method of disability income insurance by the numbers: Decrement-increment Tables method, Manchester Union Method and Multi-States Method, these would give some guideline to pricing practice.5. It makes the comparisons between the methods, and it points out the advantages and disadvantages of these methods. It also gives some advices to use these methods to price for disability income insurance. All these would do great benefit to pricing practice on disability income insurance.