Claim inception rate vs claim termination rate

[Satya]

Hello,

I'd just like to double check that my understanding of these terms is correct. I believe they are mostly applicable to Income Protection and Long Term Care insurance.

The claim inception rate is the probability that a benefit will be paid to an individual in the year of age x to x + 1. It is typically derived from the "sickness inception rates" by multiplying them by the probability of remaining sick throughout the deferred period.

The claim termination rate is the probability that a claimant will stop receiving benefits in the year of age x to x + 1, e.g. because of a full recovery or death.

The former term is defined in the core reading, but I do not believe the latter term is defined in the core reading. So really I'm just double checking that my understanding of claim termination rates is sound.

Thanks!

 

[Anna Walklate]

Claims terminate due to three possible events: recovery, death and reaching the expiry age (or term) under the policy. It is a very general definition and when analysing their experience, insurers will be a lot more specific about the exact definition they use.

Similarly, "claim inception rate" is a very general term - it simply refers to a rate at which claims start. The definition you are referring to (including year of age) is a specific example given in Chapter 17.

I hope that helps!