Outline of the presentation Long-term care risk as a part of global longevity risk An analysis of lapse behavior The reform of LTC financing in France Long-Term Care: risk description, lapse behavior of LTC policyholders and issues in LTC financing Jean Pinquet 1 1 Paris 10 & Ecole Polytechnique AXA, avenue Matignon Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk An analysis of lapse behavior The reform of LTC financing in France Outline of the presentation Analysis of the demand side of Long-Term Care (LTC) insurance, from a case study on a portfolio of Spanish insurance contracts. Description of LTC risk. Analysis of lapse behavior for LTC policyholders. Issues in LTC financing. Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk An analysis of lapse behavior The reform of LTC financing in France Outline of the presentation Analysis of the demand side of Long-Term Care (LTC) insurance, from a case study on a portfolio of Spanish insurance contracts. Description of LTC risk. Analysis of lapse behavior for LTC policyholders. Issues in LTC financing. Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk An analysis of lapse behavior The reform of LTC financing in France Outline of the presentation Analysis of the demand side of Long-Term Care (LTC) insurance, from a case study on a portfolio of Spanish insurance contracts. Description of LTC risk. Analysis of lapse behavior for LTC policyholders. Issues in LTC financing. Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk An analysis of lapse behavior The reform of LTC financing in France Outline of the presentation Analysis of the demand side of Long-Term Care (LTC) insurance, from a case study on a portfolio of Spanish insurance contracts. Description of LTC risk. Analysis of lapse behavior for LTC policyholders. Issues in LTC financing. Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk LTC risk on a Spanish portfolio An analysis of lapse behavior The reform of LTC financing in France Main results on LTC risk, either global or derived from a Spanish database The probability to face an irreversible disability spell at the end of the life cycle is roughly equal to 0.2 (average on gender, derived for potential purchasers of LTC insurance). The average duration of a spell is about five years. Hence the expected duration in an LTC state is about one year when you are a young senior in good health. In France: 1M individuals in an LTC state, related public spending: > 1% of GDP, (compared with 16M retirees and pensions = 14.4% of GDP). Results given later on LTC risks are drawn from the analysis of a Spanish portfolio (150000 policies; The contract is a bundle which comprises an LTC component together with health and life cover- ages; About 3000 LTC spells). Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk LTC risk on a Spanish portfolio An analysis of lapse behavior The reform of LTC financing in France Main results on LTC risk, either global or derived from a Spanish database The probability to face an irreversible disability spell at the end of the life cycle is roughly equal to 0.2 (average on gender, derived for potential purchasers of LTC insurance). The average duration of a spell is about five years. Hence the expected duration in an LTC state is about one year when you are a young senior in good health. In France: 1M individuals in an LTC state, related public spending: > 1% of GDP, (compared with 16M retirees and pensions = 14.4% of GDP). Results given later on LTC risks are drawn from the analysis of a Spanish portfolio (150000 policies; The contract is a bundle which comprises an LTC component together with health and life cover- ages; About 3000 LTC spells). Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk LTC risk on a Spanish portfolio An analysis of lapse behavior The reform of LTC financing in France Main results on LTC risk, either global or derived from a Spanish database The probability to face an irreversible disability spell at the end of the life cycle is roughly equal to 0.2 (average on gender, derived for potential purchasers of LTC insurance). The average duration of a spell is about five years. Hence the expected duration in an LTC state is about one year when you are a young senior in good health. In France: 1M individuals in an LTC state, related public spending: > 1% of GDP, (compared with 16M retirees and pensions = 14.4% of GDP). Results given later on LTC risks are drawn from the analysis of a Spanish portfolio (150000 policies; The contract is a bundle which comprises an LTC component together with health and life cover- ages; About 3000 LTC spells). Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk LTC risk on a Spanish portfolio An analysis of lapse behavior The reform of LTC financing in France Main results on LTC risk, either global or derived from a Spanish database The probability to face an irreversible disability spell at the end of the life cycle is roughly equal to 0.2 (average on gender, derived for potential purchasers of LTC insurance). The average duration of a spell is about five years. Hence the expected duration in an LTC state is about one year when you are a young senior in good health. In France: 1M individuals in an LTC state, related public spending: > 1% of GDP, (compared with 16M retirees and pensions = 14.4% of GDP). Results given later on LTC risks are drawn from the analysis of a Spanish portfolio (150000 policies; The contract is a bundle which comprises an LTC component together with health and life cover- ages; About 3000 LTC spells). Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk LTC risk on a Spanish portfolio An analysis of lapse behavior The reform of LTC financing in France Entry rate in LTC and duration of LTC spells The entry rate was derived from a Lee-Carter specification of the transition intensity from good health to LTC (related to a proba- bility in a binomial distribution). The entry rate into LTC increases by 11% by suplementary year of age. No clear cohort e ff ects. Duration of LTC spells: the mortality rate in the LTC state is equal to 20% on average, increases by 5% and by 2% every year with age and calendar time, decreases by 15% for women w.r.t. men, and is almost unrelated to seniority in the LTC spell (results given ceteris paribus ). These results confirm common knowledge on LTC risks (increase in frequency with calendar time due to the aging of the population, partly compensated by a decrease in duration (the ”compression of morbidity”). Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
Outline of the presentation Long-term care risk as a part of global longevity risk LTC risk on a Spanish portfolio An analysis of lapse behavior The reform of LTC financing in France Entry rate in LTC and duration of LTC spells The entry rate was derived from a Lee-Carter specification of the transition intensity from good health to LTC (related to a proba- bility in a binomial distribution). The entry rate into LTC increases by 11% by suplementary year of age. No clear cohort e ff ects. Duration of LTC spells: the mortality rate in the LTC state is equal to 20% on average, increases by 5% and by 2% every year with age and calendar time, decreases by 15% for women w.r.t. men, and is almost unrelated to seniority in the LTC spell (results given ceteris paribus ). These results confirm common knowledge on LTC risks (increase in frequency with calendar time due to the aging of the population, partly compensated by a decrease in duration (the ”compression of morbidity”). Jean Pinquet Conference on longevity and pensions funds Long-Term Care: risk description, lapse behavior of LTC policyholders and issues
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