Tunghai University, Taiwan; National Kaohsiung First University of Science and Technology ;National Cheng Chi University
Currently insurance companies adopt a traditional actuarial view and use expected values to evaluate the premiums for lifetime health insurance policies with limited coverage. This pricing method results in a serious overpricing problem when the coverage limit is not very low or very high. This paper explains why such practical pricing methods contribute to excess premiums and provides a theoretical framework for evaluating fair premiums for lifetime health insurance policies with limited coverage. Using internal data provided by insurance companies, this study depicts the relationship between excess premiums and the level of limited coverage as a humped curve; the maximum excess premium ratio is nearly 20% for certain limited coverage for younger insureds.