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Scirj, Volume VI [2019]
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Scirj Volume VII, Issue VII, July 2019 Edition
ISSN: 2201-2796

ENSURING THE PROFITABILITY AND CONTINUITY OF PRIVATE HEALTH INSURANCE

DR. YOHANNA GYANG JUGU

Abstract: Every Insurance undertaking has to do with risk evaluation to ensure that the insurance business is always solvent and continue to exist. Health insurance like life insurance funds and non-life insurance funds must ensure that it remains in business and can discharge their liabilities as at when due. Hence the need to keep adequate reserves or economic capital always. The paper derives the methodology for deriving premiums taking into consideration the incidence of sickness and the medical bills. They are both assumed to follow a normal distribution with known means and standard deviations. The extra liability or reserves that must be kept is shown in a functional relationship. Various probabilities of ruin are used to compute the reserves. The reserves increases from 12.089% of the expected liability for a probability of ruin of 0.25 to 53.562% of normal liability for a probability of ruin of .001. The Insurance provider wants an almost guarantee that ruin or insolvency is impossible it goes for a probability of ruin of 0.001 and reserves is more than half the expected liabilities .

Reference this Paper: ENSURING THE PROFITABILITY AND CONTINUITY OF PRIVATE HEALTH INSURANCE by DR. YOHANNA GYANG JUGU published at: "Scientific Research Journal (Scirj), Volume VII, Issue VII, July 2019 Edition, Page 90-95 ".

Search Terms: incidence of sickness, medical claims, normal distribution, variances, probability of ruin and economic reserves, solvency

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