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

Guglielmo D’Amico (), Montserrat Guillen and Raimondo Manca ()
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Guglielmo D’Amico: Dipartimento di Scienze del Farmaco, Università G. D’Annunzio of Chieti-Pescara, Chieti, Italy
Raimondo Manca: Dipartimento di Metodi e Modelli per l’Economia, il Territorio e la Finanza, Università La Sapienza di Roma, Roma, Italy

No XREAP2012-05, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

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.

Pages: 29 pages
Date: 2012-03, Revised 2012-03
New Economics Papers: this item is included in nep-hea, nep-ias and nep-ore
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Citations: View citations in EconPapers (1)

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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2012-05.pdf First version, 2012 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2012-05.pdf Revised version, 2012 (application/pdf)

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