### Abstract

We use economic indicators to improve the prediction of the number

of incurred but not recorded disability insurance claims, assuming that

there is a link between the number of claims and the chosen economic

indicators. We propose a Bayesian model where we model the claims

development in three directions: along incurred periods, recording lag periods and calendar periods. A stochastic model of the economic indicators

is incorporated into the calendar period development direction. Thus we

allow for the impact of the economic environment on the number of claims.

Applying the proposed model to data, we illustrate how the inclusion of

economic indicators effects the prediction of the number of incurred but

not recorded disability claims.

of incurred but not recorded disability insurance claims, assuming that

there is a link between the number of claims and the chosen economic

indicators. We propose a Bayesian model where we model the claims

development in three directions: along incurred periods, recording lag periods and calendar periods. A stochastic model of the economic indicators

is incorporated into the calendar period development direction. Thus we

allow for the impact of the economic environment on the number of claims.

Applying the proposed model to data, we illustrate how the inclusion of

economic indicators effects the prediction of the number of incurred but

not recorded disability claims.

Original language | English |
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Pages (from-to) | 381-400 |

Number of pages | 20 |

Journal | Annals of Actuarial Science |

Volume | 6 |

Issue number | 2 |

Early online date | 30 Apr 2012 |

DOIs | |

Publication status | Published - 1 Sep 2012 |

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## Cite this

Donnelly, C., & Wuethrich, M. (2012). Bayesian prediction of disability insurance frequencies using economic indicators.

*Annals of Actuarial Science*,*6*(2), 381-400. https://doi.org/10.1017/S1748499512000024