Technical Bases for LTC Covers Including Mortality and Disability Projections

Long Term Care (LTC) covers are insurance products for which it is difficult to choose proper pricing and valuation bases, since information coming from practical experiences is still scanty. Moreover, due to their lifetime duration, they are significantly affected by demographical trends. This paper addresses the question of building technical bases for LTC covers. Uncertainty coming from future mortality trends and disability levels is stressed. The framework adopted is a multistate, time-continuous model; premiums and reserves are assessed relying on an inception-annuity scheme. A risk analysis with regard to both mortality and disability rates is performed.

KEYWORDS: Long Term Care covers, premium basis, valuation basis, loss function, projected mortality table, projected inception rates, longevity risk