Determination of optimal premiums and claims mix for a Health Insurance Scheme

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2008-08-10
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Abstract
One challenge for a Private Health Insurance Scheme which has a segmented market is to get proper premiums and claims mix for the different policy options in order that it will attract potential subscribers so that returns will be maximized. This study addresses the above challenge by developing a Linear Programming Problem model which is tested using five different scenarios. The study revealed that while subscribers in the two lower policy levels are attracted by decreasing their premiums, those of the highest policy level are attracted by an increase in their claims and an improved quality of service. It is also found that there is a limit to how much the premiums could be .decreased. Beyond this limit returns will start dwindling (diminishing returns). The evidence therefore suggests that the Private Health Insurance Firm should within some limits decrease premiums for lower policy levels and increase claims for higher policy levels in order to expand its clientele base while maximizing returns.
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A Thesis submitted to the Board of Graduate Studies of the Kwame Nkrumah University of Science and Technology, Kumasi in partial fulfillment of the requirement of the Master of Science degree in Industrial Mathematics, 2008
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