Modelling long term care insurance in Singapore
Tan, Angeline Aan Chi
Date of Issue2009
College of Business (Nanyang Business School)
With the impending increase in the ageing population, it is estimated, that eleven in hundred Singaporeans may require long term care. As a result, the Singapore government introduced ElderShield as an affordable severe disability insurance in 2002. However, extensive research on the construction of long term care disability model for Singapore has not been carried out. The main objective of this study is to construct a multiple state model of disability for Singaporeans using ElderShield data which is of a non-longitudinal. We also investigate the feasibility of the multiple state model approach on LTC insurance in Singapore. The construction of the disability model requires transition probabilities and intensities. Due to the unavailability of longitudinal census data, a discrete time framework by Rickayzen and Walsh  is adopted to estimate one-step transition probabilities. Thereafter, transition intensities are obtained by decomposing the estimated transition probabilities under Schur-Parlett’s method. The intensities are further constrained and graduated under complex mathematical methods used in life insurance. Our investigation shows that the multiple state model is able to produce reliable results for practical purposes. As one would expect, the transition probabilities and intensities estimated from the disability model increase with age and disability states. These findings are realistic and thus show the feasibility of the model. The practical use of disability models is to price LTC insurance. Although premiums are not calculated in this study, possible methods for pricing and scenario analyses are discussed. A possible avenue for future research can include pricing LTC insurance using this model.
Final Year Project (FYP)
Nanyang Technological University