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Experience rating in the classic Markov chain life insurance setting

An empirical Bayes and multivariate frailty approach

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A Discussion on recent papers to this article was published on 04 June 2019

A Discussion on recent papers to this article was published on 04 June 2019

Abstract

We consider experience rating in the classic Markov chain life insurance setting. We focus on shrinkage estimation of group effects in an empirical Bayes and multivariate frailty extension, building on ideas from group life insurance and survival and event history analysis. Within this framework, we provide insights regarding the structure of the likelihoods and sufficiency of summary statistics such as occurrences and exposures. Simple shrinkage estimators, given by well-known credibility formulas, are obtained under quadratic loss for mutually independent conjugate Gamma priors. The applicability of these simple shrinkage estimators for disability insurance is illustrated in a numerical example using simulated data.

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Authors and Affiliations

  1. University of Copenhagen, Universitetsparken 5, 2100, Copenhagen Ø, Denmark

    Christian Furrer

  2. PFA Pension, Sundkrogsgade 4, 2100, Copenhagen Ø, Denmark

    Christian Furrer

Authors
  1. Christian Furrer
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Correspondence to Christian Furrer.

Additional information

Work partly funded by the Innovation Fund Denmark (IFD) under File No. 7038-00007B.

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Furrer, C. Experience rating in the classic Markov chain life insurance setting. Eur. Actuar. J. 9, 31–58 (2019). https://doi.org/10.1007/s13385-019-00190-5

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  • DOI: https://doi.org/10.1007/s13385-019-00190-5

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