Some aspects of the modelling of permanent health insurance

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The traditional approach in the United Kingdom to the analysis of permanent health insurance (PHI) data and to the rating of PHI business has been the Manchester Unity approach. This approach, which has its origins in Friendly Society business, is in some ways unsuitable for modern PHI business. (An interesting discussion on this subject can be found in Report No. 7 of the Continuous Mortality Investigation Bureau.) For this reason the PHI Sub-Committee of the CMIB has recently been investigating the possibility of using a different approach, involving the use of a multiple state model, for analysing PHI data. A full report on the Sub-Committee’s investigation will be published soon as CMIR, 10. This paper is concerned with the modelling of PHI in general, and with the CMIB’s multiple state model in particular. We shall not attempt to duplicate the very full discussion of the model which will appear in CMIR, 10. Instead, we shall concentrate on the reasons underlying the choice of a model for PHI.