TY - JOUR

T1 - Transaction time models in multi-state life insurance

AU - Buchardt, Kristian

AU - Furrer, Christian

AU - Lunding Sandqvist, Oliver

N1 - Publisher Copyright: © 2023 Informa UK Limited, trading as Taylor & Francis Group.

PY - 2023

Y1 - 2023

N2 - In life insurance contracts, benefits and premiums are typically paid contingent on the biometric state of the insured. Due to delays between the occurrence, reporting, and settlement of changes to the biometric state, the state process is not fully observable in real-time. This fact implies that the classic multi-state models for the biometric state of the insured are not able to describe the development of the policy in real-time, which encompasses handling of incurred-but-not-reported and reported-but-not-settled claims. We give a fundamental treatment of the problem in the setting of continuous-time multi-state life insurance by introducing a new class of models: transaction time models. The relation between the transaction time model and the classic model is studied and a result linking the present values in the two models is derived. The results and their practical implications are illustrated for disability coverages, where we obtain explicit expressions for the transaction time reserve in specific models.

AB - In life insurance contracts, benefits and premiums are typically paid contingent on the biometric state of the insured. Due to delays between the occurrence, reporting, and settlement of changes to the biometric state, the state process is not fully observable in real-time. This fact implies that the classic multi-state models for the biometric state of the insured are not able to describe the development of the policy in real-time, which encompasses handling of incurred-but-not-reported and reported-but-not-settled claims. We give a fundamental treatment of the problem in the setting of continuous-time multi-state life insurance by introducing a new class of models: transaction time models. The relation between the transaction time model and the classic model is studied and a result linking the present values in the two models is derived. The results and their practical implications are illustrated for disability coverages, where we obtain explicit expressions for the transaction time reserve in specific models.

KW - claims reserves

KW - disability insurance

KW - piecewise deterministic processes

KW - Prospective reserves

KW - valid and real-time

UR - http://www.scopus.com/inward/record.url?scp=85149396451&partnerID=8YFLogxK

U2 - 10.1080/03461238.2023.2181708

DO - 10.1080/03461238.2023.2181708

M3 - Journal article

AN - SCOPUS:85149396451

VL - 10

SP - 974

EP - 999

JO - Scandinavian Actuarial Journal

JF - Scandinavian Actuarial Journal

SN - 0346-1238

ER -