Epidemiological Modeling in Life Insurance

28 Pages Posted: 7 Nov 2022

See all articles by Laura Francis

Laura Francis

University of Copenhagen

Mogens Steffensen

University of Copenhagen

Date Written: October 4, 2022

Abstract

The coronavirus pandemic has created a new awareness of epidemics, and insurance companies have been reminded to consider the risk related to infectious diseases. This paper extends the traditional multi-state models to include epidemic effects. The main idea is to specify the transition intensities in a Markov model such that the impact of contagion is explicitly present in the same way as in epidemiological models. Since we can study the Markov model with contagious effects at an individual level, we consider individual risk and reserves relating to insurance products, conforming with the standard multi-state approach in life insurance mathematics. We compare our notions with other but related notions in the literature and perform numerical illustrations.

Note:
Funding Information: None.

Conflict of Interests: None.


Keywords: Compartment models, Markov models, contagion, Kolmogorov's differential equations, state-wise reserves

JEL Classification: G22, I13, C69

Suggested Citation

Francis, Laura and Steffensen, Mogens, Epidemiological Modeling in Life Insurance (October 4, 2022). Available at SSRN: https://ssrn.com/abstract=4238013 or http://dx.doi.org/10.2139/ssrn.4238013

Laura Francis

University of Copenhagen ( email )

Copenhagen
Denmark

Mogens Steffensen (Contact Author)

University of Copenhagen ( email )

Universitetsparken 5
DK-2100 Copenhagen
Denmark

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