The application of loss modeling in pricing for group health insurance in the Philippines
Date of Publication
2-2018
Document Type
Master's Thesis
Degree Name
Master of Science in Financial Engineering
Subject Categories
Insurance
College
Ramon V. Del Rosario College of Business
Department/Unit
Financial Management
Thesis Adviser
Tomas S. Tiu
Defense Panel Chair
Liberty S. Patiu
Defense Panel Member
Rene B. Betita
Marycris O. Albao
Abstract/Summary
As regulatory changes take place in the Philippine health insurance industry, this study focused on addressing the existing pricing concerns by introducing the loss model driven Frequency-Severity Method which is widely used in other insurance markets around the world. The study aimed to demonstrate the application of risk management and loss modeling on the estimation of health insurance product prices and the advantages and disadvantages of the Frequency-Severity Method over the traditional Loss-Cost approach in which only claims severity is estimated. The results of the study showed that by classifying data according to its similar characteristics, the risk of wrongly specifying a best-fit probability distribution is minimized, percentiles can be determined through Maximum Likelihood Estimation hence avoiding the use of the central limit theorem and the resulting segmented pricing equation is more effective in expressing in numbers the primary pricing drivers. Claims data were right-skewed heavy-tailed and best-fitted into the Weibull distribution as determined by Anderson Darling and p-value estimates. The modeled premiums were approximately twenty-percent higher than the empirical premiums, however, showed a fifty-percent increase in underwriting profit on the onset. The twenty-percent gap was also addressed through the adjustment of the frequency component, and by this adjustment proved the versatility of the pricing model.
Abstract Format
html
Language
English
Format
Electronic
Accession Number
CDTG007547
Shelf Location
Archives, The Learning Commons, 12F Henry Sy Sr. Hall
Keywords
Health insurance--Philippines; Health insurance--Rates--Philippines
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Recommended Citation
Baria, S. G. (2018). The application of loss modeling in pricing for group health insurance in the Philippines. Retrieved from https://animorepository.dlsu.edu.ph/etd_masteral/5465