pricing disability

[Shadowcat]

are the following 3 equations just different ways to price the same product, or are there various circumstances you would use one and not the other. or are they completely different, and i'm missing something?

1. Tabular rating for disability net premium = Sum[Pr(Claim)*AC*v*l]
2. Base rates for disability = I*Reserve/12
3. Net manual premiums for LTD = Incidence*Sum[Benefit*Continuance*v]

[almostASA]

I have trouble keeping these straight too, but I think that the second and third ones are actually the same concept, just different symbols. The reserve equals the present value of expected future claims, which should be sum(benefit*continuance*discount). So both of them multiply the probability of having a claim (incidence) by the PV of expected future claims.

I would extend this and say that the 3 formulas are all the same concept, but I'm not sure about the first formula. It has some of the same concepts, but the l(x) factor throws me off. It is equal to the "proportion of originally issued lives still in force." It makes sense to me that this factor should be part of equation 1 since it sums over the life of the policy, but I can't come up with why it doesn't appear in the other two equations. Maybe it's implicit in the rates of the other two equations?

I don't work in disability, so if I'm wrong someone correct me!

[Angstrom]

Same concept.

I don't have my materials here, but isn't the first one for Individual and the last two from the Group chapters? Thus the l(x) in the first equation.

[gppbb]

are the following 3 equations just different ways to price the same product, or are there various circumstances you would use one and not the other. or are they completely different, and i'm missing something?

1. Tabular rating for disability net premium = Sum[Pr(Claim)*AC*v*l]
2. Base rates for disability = I*Reserve/12
3. Net manual premiums for LTD = Incidence*Sum[Benefit*Continuance*v]

Is the reason for dividing by 12 to get to the monthly rate?

[almostASA]

Angstrom is right - the first formula is for rating individual disability.

Yes, the 12 is to make it a monthly premium.