Morbidity Risk (Morbiditätsrisiko)
Morbidity risk is the risk that the actual frequency or severity of illness within an insured population deviates from the assumptions used in premium pricing.
Concept
Morbidity risk refers to the risk that the actual frequency, severity, or duration of illness within an insured population deviates from the assumptions used in premium pricing. It is the central biometric risk category in health insurance and also arises in disability and long-term care insurance, where benefits are tied to the occurrence of an illness or disability.
Causes of Deviation
Deviations of actual morbidity from calculated assumptions can be caused by medical progress (which, on one hand, increases treatment costs but, on the other, also extends the life expectancy of those affected), by demographic shifts, by changes in the population’s health behavior, or by epidemiological events such as pandemics.
Relevance for Pricing
Unlike mortality risk, where death is a clearly identifiable and singular event, modeling morbidity risk is more complex, since the course of an illness can involve varying degrees of severity, recurrences, and variable treatment durations; insurers limit this risk, among other things, through premium adjustment clauses that allow for a subsequent correction of the premium in the event of a significant deviation of actual from calculated morbidity.