PENENTUAN PROVISION FOR ADVERSE DEVIATION (PAD) PADA RISIKO MORTALITAS SUBSTANDAR DALAM MEMPREDIKSI CADANGAN ASURANSI LONG-TERM CARE (LTC)

• Main Author: Saadah, Yalela
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76139
• Institution: Institut Teknologi Bandung

In actuarial practice, the calculation of reserves for insurance covers in the health care area is required. The calculation is a necessity to anticipate unexpected LTC insurance policy claims in the future. This study adopts a conservative approach by analyzing the main components of long-term mortality risk and treating them separately in determining the Provision for Adverse Deviation (PAD). PAD is the addition of a life expectancy margin intended for the calculation of conservative Long-Term Care (LTC) insurance reserves. The future evolution of mortality and disability transition intensities is depicted by a continuous stochastic projection model. Then, the mathematical formula of the deterministic cash flow model will be proposed by considering long-term mortality risk PAD in the context of risk adjustment to ensure reserve adequacy and financial stability in the face of adverse situations. Through the modeling and simulation steps of LTC insurance reserve calculation, it is shown that LTC insurance reserves with the application of PAD have a higher value of about 45% than LTC insurance reserves without PAD. Thus, applying PAD to the calculation of LTC insurance reserves can be an effective strategy to achieve financial stability and viability in the LTC insurance industry.