I am trying to better understand the formula for net monthly premium which equals:
Incidence Rate * Sum over the benefit period of (Benefit_tContinuance_tInterest Discount_t).
So in this formula, t is the month in question right?
If t = 1, for example, then we are multiplying the Benefit for the 1st month * Probability they are disabled that 1st month * discount to time t=0? and then we would add that to Benefit for the 2nd month * probability they remained disabled for the 2nd month * discount to time t=0, and so on?
Looking at question 1 of the Fall 2011 Group and Health D&P Exam, Morning session, if we are told $800 is the claim cost per claimant, how is it that this is equivalent to this part:
Sum over the benefit period of (Benefit_tContinuance_tInterest Discount_t) ?