Pricing on individual health insurance

Abstract

“How much” is the main problem at task in the health care insurance. This becomes more complex situation when it comes to the case of projecting on future possible financial scenarios. Due to the rising cost of health insurance, insurers argue that pooling of risk is a possible way of eventually reducing the cost of medical financing in the long run. The main goal of every individual who offers health insurance to himself or his family members is to find a precise and accurate estimate of premiums to be paid to the insurance company in the provision of essential medical service. This work thus comes up with a mathematical estimation procedure stipulating the theoretical premium amount that is contributed to medical insurers to offset the rising financial costs based on past experience on claims. Results for predictions of premiums to be paid in current times are based on claim experiences. This work then performs comparative studies on future credibility premiums based on both the Buhlmann’s and the Buhlmann-Straub procedures. Result shows that the Buhlmann-Straub procedure yields higher premium amount.