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Private long term care insurance: Theoretical approach and results applied to the Spanish case

Pablo Alonso González () and Irene Albarrán Lozano
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Irene Albarrán Lozano: Departamento de Estadística, Universidad Carlos III de Madrid.

No 902, Alcamentos from Universidad de Alcalá, Departamento de Economía.

Abstract: The passing of the Law 39/2006 has given to Spanish insurance companies the chance of offering products that cover the expenses associated to the risk of dependence. However, due to the lack of reliable statistic information about dependent population, it is extremely difficult to evaluate not only the frequency but also the cost. These two items make the pricing process with a big cloud of uncertainty. This paper proposes a methodology for premium calculation taking into account not only the availability of the data but also the current legal framework in Spain. Together to the theoretical approach, premium calculations for two possible versions are included. Finally, it is introduced a simulation model that pretends to evaluate the impact that a portfolio with these kind of contracts would have on the solvency of an insurance company.

Keywords: Long term care insurance; pricing; multi-state model; simulation; solvency (search for similar items in EconPapers)
JEL-codes: C15 C39 C63 G22 (search for similar items in EconPapers)
Pages: pages 40
Date: 2009
New Economics Papers: this item is included in nep-eec, nep-hea and nep-ias
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