GH-VR Spring 2023

Will start the thread by asking a question related to the syllabus materials.

In chapter 6 of individual health insurance, there is an example where the premiums are paid at the beginning of the year. So in the premium calculation, it is not adjusted for policy termination.

But at the end of the year, the expected claims per in-force policy are 1000 in the first year. However, the author discounts the claims by policies in force, 0.9 - which is the average proportion that will pay for the second year. This doesn’t make sense to me, since everyone is still in force at the end of the year. If they weren’t, then we wouldn’t be crediting a full premium. In my view, the number of policies in force eligible for claim should be 1, .9, .9^2, .9^3, and .9^4.

Can anyone help this make sense?

I haven’t read this or anything. But if the policies are all written on 1/1/2021, say, then if you are sitting at 12/31/2021, all the policies will still be in force. But the next day, only 90% will renew.

That is how I am understanding it too. And if that is the case, we should have 1000 in claims, not 900.

It does say that lapses occur at the midpoint of the year, but a lapse that results in a full premium payment credit? seems odd (otherwise you could assume that the 997.84 is the net of refunds, but then it isn’t a level premium in the way we usually think of it)

I guess if it comes up on the exam, you say “even though insurers refund cancellations for incomplete modal premiums, we assume that there is no refund like the example in Chapter 6 of Individual Health Insurance”