Actuarial Applications of a Statistical Model for Long-Term Care Insurance Operated with a Score-based Grading System: A Case Study of Korean Long-Term Care Insurance (K-LTCI)

Abstract Long-term care insurance plays a very important role as providing a protection against financial risk of an individual when he/she becomes in a health condition incurring significant costs for long-term care. Construction of an appropriate actuarial model for long-term care is an integral part of maintaining and improving a long-term care insurance system. A model is suggested for analyzing the impact of change in score-based long-term care grading system and for estimating future cost of long-term care insurance. A spliced distribution was used to model assigned scores for long-term care insurance in Korea based on experience data. The suggested approach is quite flexible, as it allows us to adapt to possible changes in the grading system.