Life Insurance: New Account Model

Abstract

This problem was derived from an example in [1]. The system is shown in Fig. 15.1. This figure shows how this insurance company handles an application for an insurance policy. New account applications arrive at the rate of λ per unit time. We use the exponential to model time between arrivals with 1/λ the mean time between arrivals. A new account first goes to the credit check (CC in Fig. 15.1) station. All service times will be modelled by the normal distribution. The clerk at CC can reject the application, with probability p₁, or not reject and send it on to “SPLIT” . The SPLIT operation creates a “clone” (an identical copy of the application) and sends one copy to RR (risk rating) and the other to M (medical check). The SPLIT operation is assumed to take no time, or there is no delay at SPLIT. The medical check station is staffed by medical doctors who review the medical history of the applicant and the risk rating station has clerks who evaluate the company’s risk in the policy. After M and RR the two copies come together at JOIN and proceed as one file.