RISK PREMIUM PRICING IN HEALTH INSURANCE APPLYING DEDUCTIBLE USING EXPECTED VALUE PRINCIPLE

• Main Author: SYARAFINA, NURUL
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/65374
• Institution: Institut Teknologi Bandung

Deductible is a part of the claim amount that needs to be paid by the policyholder themselves or the minimum claim limit approved by the insurance company. As a result of applying the deductible, it affects the changes in frequency of claim, severity of claim, and the premium charged to the policyholder as well. Some of the reasons the insurance companies apply deductible are to overcome moral hazard and to avoid paying claims of small amount. In this final project, the Expected Value Principle method is used to calculate the premium with the deductible. Loading factor is used in EVP, which can be interpreted as administrative costs or profits for insurance company. The loading factor is estimated using a lognormal distribution approximation. Premiums and loading factor are calculared at different levels of deductibles and profit probability. The larger the deductible, the lower the premium value. The greater the probability of the desired profit increases the loading factor as aresult the premium value is getting larger as well. Then, the relativity function is aldo determined with a certain deductible base value to describe the effect of the deductible value on the total expected claim.