Modelling Income Protection Insurance claim termination rates by cause of sickness III: Mortality

This is the third of three papers in which we present methods and results for the estimation and modelling of claim termination rates for Income Protection (IP) insurance, allowing for different causes of claim. In the first paper we discussed recoveries. We model the mortality of IP claimants as the sum of two components: a base mortality, which is a function of age and calendar year, but not of the specific cause of sickness or its current duration, and a cause-specific component which does depend on the current duration of the sickness. The modelling of the base mortality, using data for UK assured lives, was discussed in the second paper. In this paper we discuss the modelling of the cause-specific component of the mortality of IP claimants. We use data supplied by the Continuous Mortality Investigation relating to IP claims paid in the years 1975 to 2002.
In the final section of this paper we present some numerical results for cause-specific claim annuity rates for current claims and aggregate claim termination rates based on the models developed in all three papers.