An actuarial model to design insurance programs to cover the costs of epidemics

What is it about?

Unlike other health or life insurance costs, that develop over long periods of time, epidemics spread very quickly in a population. Costs for treatment or death benefits balloon fast, peak out and then die out almost quickly as they appeared. Traditional actuarial techniques do not work when valuing such programs and setting reserves. This paper bridges epidemiological and actuarial models to solve the problem.

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Photo by Ani Kolleshi on Unsplash

Photo by Ani Kolleshi on Unsplash

Why is it important?

A key element in an efficient response to an epidemic outbreak is to have sufficient funds to cover the medical treatment of affected patients. Otherwise, untreated diagnosed individuals will continue to infect others accelerating the spread of the disease. Our proposal gives guidelines to set proper reserves (funds) so that funds will be sufficient in the event of an epidemic outbreak.