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A flexible group benefits framework for pricing deposit rates

Thesis type
(Project) M.Sc.
Date created
Author: Ng, Cherie
Currently, most flexible group benefit plans are designed and priced based on deterministic assumptions about the plan members' option selections. This can cause the adverse selection spiral, threatening the sustainability of the plan. We therefore propose a comprehensive framework with a novel pricing formula that incorporates both a model for claims and a model for plan members' enrollment decisions to prevent adverse selection. We find through simulation that our proposed pricing formula outperforms the traditional pricing practice by keeping flex plans sustainable over time. In addition to preventing the adverse selection spiral through pricing, our framework also serves as a tool to evaluate the impact of other parameters such as changes in plan designs, health costs, and member decision.
Copyright statement
Copyright is held by the author(s).
This thesis may be printed or downloaded for non-commercial research and scholarly purposes.
Supervisor or Senior Supervisor
Thesis advisor: Bégin, Jean-François
Thesis advisor: Sanders, Barbara
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