Title: Epidemic Models and Their Insurance Applications

Abstract: The impact of COVID-19 in the health insurance industry have been felt through increase in health spending and uncertainty in projecting future medical claims. One significant consideration is that health insurers pay different benefits to the infected individuals over their course of infection. However, traditional actuarial models lack the flexibility to describe the rapidly changing environment during a pandemic. The first part of this talk offers a brief overview of basic models in the epidemiology literature as well as several actuarial applications, ranging from product design and reserving of epidemic insurance, to the projection of healthcare demand and the allocation of scarce resources. The intent is to bridge classical epidemiological models with actuarial and financial applications that provide healthcare coverage and utilize limited healthcare resources during a pandemic. For the second part of this talk, we introduce a class of infection-age epidemic models which can better capture the transmission dynamics. We then use these models to determine the cost and reserves for healthcare insurance. Compared to classical life insurance, healthcare insurer's reserve function exhibits different patterns over the course of a pandemic and so we formulate conditions under which various reserve shapes arise. Inspired by the well-known loss reserving techniques, we present a loss triangle method to predict future unpaid healthcare liabilities.