Mortality graduation using a rating up approach

Abstract

Modeling the risk profile of a heterogeneous life from unreported risks is complex. Insurance firms routinely disregard unreported risk factors perhaps because of difficulties in modeling. The scientific interest of the study is to account for unreported heterogeneity factors using a compound process. For comparison reasons the gamma (mostly applied in literature) and non-central gamma compound process are suggested with the generalized exponential and generalized Weibull baselines to account for unreported heterogeneity. In this study, maximum likelihood estimation is used to calibrate the base force of mortality distributions using a large Kenyan insurer term insurance data. Subsequently, the performance of the candidate models described above is compared following the criteria information values. The findings show that the non-central gamma generalized Weibull is significant to model the insurers’ claims events.