Life insurance policies with embedded or attached long-term care (LTC) benefits, or hybrid products, have been sold on the market for decades. In an article published with the Society of Actuaries, we discuss the two main model types for modeling hybrid life and health products. We examine the pros and cons of a claim cost model and integrated first-principles model. Sections include:

• Modeling approaches
• Integrated first-principles (IFP) modeling
• Advantages of IFP modeling
• Hedging effects of hybrid products
• Modeling the interplay of assumptions and sensitivities
• Cash flows and reserving at future time steps

Read the full article here.