Multimorbidity is common in old age. However, it is usually omitted in actuarial modelling despite its known impact on mortality and functional disability. In this paper we seek to demonstrate how to capture the effect of multimorbidity during old age using multistate models of functional disability with recovery. Firstly, we extend the literature on multistate health modelling by omparing two methods of integrating multimorbidity in multiple state modelling. Secondly, we develop a five state model of multimorbidity and functional disability with recovery that captures differences in disability onset, morbidity onset, healthy life expectancy and future life expectancy. Thirdly, we extend the three state health and functional disability models by quantifying the impact of multimorbidity on transition rates. Lastly, we demonstrate the effects of these differences in the pricing of various longevity and health–linked products for morbid and non–morbid groups.

Find the Q&A here: Q&A on 'Mortality Modelling and Long Term Care'