Valuation and risk assessment of disability insurance using a discrete time trivariate Markov renewal reward process

Alexander Maegebier

Insurance: Mathematics and Economics, 2013, vol. 53, issue 3, 802-811

Abstract: In disability insurance, the impact of the duration since the inception of disability on future recovery and mortality rates has been modeled by bivariate Markov renewal processes and the associated semi-Markov process, but these processes do not incorporate potential dependences between the durations in two successive states. Thus, the aim of this paper is to introduce a discrete time trivariate Markov renewal reward model, an associated formula for higher moments and a corresponding simulation that include the potential dependence between the durations, i.e. the inter-arrival times, in two successive states. The proposed model is compared with two alternative models that do not include this dependence.

Keywords: Disability insurance; Duration model; Markov reward process; Higher moments; Inter-arrival time; Dependence (search for similar items in EconPapers)
JEL-codes: C02 G22 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:53:y:2013:i:3:p:802-811

DOI: 10.1016/j.insmatheco.2013.09.013

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