The Pricing Model Analysis Of Long Term Care Insurance

Long term care insurance is health insurance which for the elder people who cannot self care, it is a new type of health insurance products which burden the older man’scare costs. According to the the latest data of UN population, in the next30years,Chinese population of aged60and above will be growing at an annual rate of16.55%,which can be said that China is running into an aging society.It can bepredict that in themiddle of this century, China’s elderly population will reach440million, there is an oldman in three or four people.According to the development trend of aging population inour country now, aging population ratio increasing from20%to30%will need20years,which is developing very rapidly. The more elderly population means more demand forlong-term care in the future. That is why long-term care insurance gettingan increasingattention of the society.Long-term care insurance is lack of time and experience in China, the pricing riskof Long-term care insurance is big, many insurance companies are not willing to takethis risk, the long-term care insurance products on the market is rarely, and almost all ofthem just provide money compensation, the insured cannot be directly provided by theinsurance company for professional nursing service, who can only get financialcompensation, it did not reduce burden of home care at all. One of the reasons for thissituation is that the pricing of long-term care insurance is difficult, so this paper basedon the viewpoint of the insurance company and the experience of the developedcountries to prove this situation,discuss the long-term care insurance pricing theory andmethod,find a long-term care insurance product to satisfied the Chinese reality needs ofcommercial.In this paper, the long-term care insurance pricing model is divided into two kinds,one kind is the static model which not to consider the state transition, including theunited model and state duration which is a random variable model; The other kind is thedynamic model which consider of the state transition, including reduced scale modeland three state Markov model. By comparing the two types of model, select the pricingmodel which is suitable to China’s current actual demand. Then on the basis of the threestate Markov model gives a model which payment is according to the different projectthemselves, the model is based on the daily life ability standard (ADLs) and theinstrument assisted living ability standard (IADLs) disability status of insured, it can be divided into four grades. Pay1000yuan,2000yuan and3000yuan of insurance to theinsured which is disability level2, disability level3, disability level4. According to theintroduction of new transition probability matrix of state Markov model for numericalcalculation, we can get net pure insurance cost of long-term care insurance from age60to75. Finally according to the particularity of long-term care insurance products, thispaper puts forward some advice on pricing.