The profitability effect of loss modelling pricing for group health insurance in the Philippines

• Main Authors: Baria, Soleil G., Tiu, Tomas S.
• Format: text
• Published: Animo Repository 2018
• Subjects: Health insurance—Rates; Health insurance—Finance; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/5963
• Institution: De La Salle University

This study showed the effect on the profitability of health insurance products using management and loss modelling in estimating health insurance product prices over the traditional methods. The study addressed the existing pricing concerns by using the loss model driven frequency-severity method used widely in many insurance markets. The results of the study showed that risk of wrongly specifying a best-fit probability distribution is minimized by classifying data according to similar characteristics, percentiles determined through maximum likelihood estimation avoiding the use of the central limt theorem and the resulting segmented pricing equation showed the new primary pricing drivers thereby correcting the distorted traditional premiums. Using the Anderson Darling an p-value estimates, claims data were right-skewed heavy-tailed and best fitted into the Weibull distribution. The modeled premiums showed a fifty-percent increase in underwriting profit on the onset compared to empirical premiums.