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

Identifier:  PC:2428

Handle: https://hdl.handle.net/20.500.11797/PC2428

Authors:  Manca, Raimondo; Guillén, Montserrat; D’Amico, Guglielmo

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.