A multiple state model for the analysis of permanent health insurance claims by cause of disability

In this paper, we present a multiple state model for permanent health insurance (PHI) which enables us to analyse PHI claims by cause of disability. This new model, which is a generalisation of the model proposed in Continuous Mortality Investigation Reports [The analysis of permanent health insurance data, Continuous Mortality Investigation Report No. 12, The Institute of Actuaries and the Faculty of Actuaries, 1991] is very useful in the underwriting and claims control stages of PHI business. In the last sections of the paper, we use the model mentioned above to calculate the average duration of a claim and claim inception rates by cause of disability. For that purpose, we use the approximations to the transition intensities obtained by Cordeiro [A stochastic model for the analysis of permanent health insurance claims by cause of disability, Ph.D. Thesis, Department of Actuarial Mathematics and Statistics, Heriot-Watt University, Edinburgh, UK, 1998] and numerical algorithms which make possible an efficient evaluation of basic probabilities. We also make general comments on the results obtained. (C) 2002 Elsevier Science B.V. All rights reserved.