Morbidity risk
Risk linked to the occurrence of illness, disability or incapacity more frequent or lasting than anticipated on health and protection cover.
Morbidity risk is the risk that an insurer suffers losses from a frequency or duration of illness, disability or incapacity higher than anticipated, on cover that pays benefits in the event of impaired health: health insurance, protection, incapacity, disability, long-term care. Distinct from mortality risk which concerns death, it concerns the health status of living insureds and the duration over which they receive benefits. It comprises an incidence risk, the occurrence of claims, and a continuance risk, the duration over which the insured remains off work or disabled. Population aging, the evolution of chronic pathologies and long-term care risk make it a growing issue for life and health insurers. Medical progress has an ambivalent effect: it can reduce mortality while increasing morbidity, by prolonging life with pathologies. Modeling morbidity risk requires specific biometric assumptions and particular attention to long-term drifts.
Textbook case: a protection insurer can suffer losses if the average duration of disability claims lengthens beyond its assumptions, materializing the continuance component of morbidity risk.
morbidity risk, incidence risk, disability risk
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