Modelling Optimal Return of Premiums in Health Insurance

Abstract

The cost of health insurance has increased tremendously recently and consequently a similar increase of premiums has resulted. Therefore insurance policies which offer tariffs with return of premiums in case of a claim-free contract may become more attractive. Comparable to the more complicated bonus malus systems in automobile liability insurance, optimal strategies can be determined in the framework of a Markovian decision model with respect to the total amount of the expected return of premiums and own settled costs. In the context of this model, future trends and strategies of the policy holder are investigated, particularly, with respect to different tariffs.