Tid: 6 oktober 2003 kl 1515-1600
Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!
Föredragshållare: Anette Engström
Titel: Huntington's Disease and Income Protection Insurance. (Examensarbete)
Genetic tests and information about family history facilitate insurers to make a better risk assessment. However, the use of this information in the underwriting process is controversial and restricted in many countries. In any case, it is interesting to be able to calculate accurate premiums considering genetic information.
In this thesis we present a semi-Markov model for Huntington's Disease (HD) in Income Protection Insurance (IPI). With this model we calculate the premium increase for persons at risk based on an HD positive genetic test result or information about family history of HD. This thesis will show that the premium can increase up to 15 times of a standard rate for a person at risk. The two factors having most impact on the result is the number of Cytosine, Adenine and Guanine (CAG) repeats in a gene on chromosome 4 and the stage at which an IPI claim is admitted.
In Sweden there is a moratorium on the use of genetic test results and information about family history in the underwriting process. As a result of this, people at risk are allowed to buy insurances without premium increase. If applicants change their insurance buying behaviour because of this asymmetric information, insurers will suffer additional costs. This behaviour is called adverse selection.
Using our model we also estimate the potential cost of adverse selection arising from HD for various market sizes and different levels of adverse selection. Our conclusion is that the potential cost of adverse selection is very small because of the rarity of HD, even under quite extreme assumptions of adverse selection.
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