Disability insurance: theory versus empirical results

Disability insurance: theory versus empirical results


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Speaker(s): Kai Kaufhold (Ad Res), Peter Nielsen (RGA)

Can disability income protection insurance be profitable for an insurer? Is there an inherent risk in the product design of disability income insurance that makes it difficult to accurately predict outcomes, and how much do the actions of industry participants influence these results? Can we measure the impact of extrinsic factors such as unemployment rates, inflation, or consumer-confidence? Does their relationship with morbidity claims exacerbate the negative impact of such economic scenarios on an insurer's financials?

This session will look at predictive modelling applied to disability income protection insurance, contrasting this to recent financial results in both stable and less predictable markets around the globe, laying the ground work for a discussion on key morbidity risk indicators to improve an insurer's reaction time.

The presentation will consider predictive modelling of disability insurance for Germany (historically stable market) and a second market that has experienced volatility (likely Australia) and aims to validate the results of the model with historical financial results on disability insurance for those markets. To complement this picture, we will also compare product features, sales environment, underwriting requirements, claims practices as well as country-specific financial indicators (e.g., unemployment rate, inflation indicators, consumer confidence). We will then expand our discussion to include a comparison of other markets (product features, insurance practices, and financial indicators), providing historical financial results where available.

Purpose of the session:

  • Compare and contrast theoretical and empirical results
  • Dialogue on product features and market practices that contribute to volatility in financial results
  • Challenge preconceived views on disability income risk

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