Abstract:
Frailty models have been used in literature to account for heterogeneity
among insureds in-terms of mortality. In this article, we compare the gamma
and the non-central gamma as frailty distributions with the exponentiated
exponential and exponentiated Weibull as baseline hazards. We adopt a fully
Bayesian approach to calibrate the baselines based on crude mortality rates from
a major Kenyan insurer. Comparing the gamma-exponentiated Weibull with the
non-central gamma-exponentiated Weibull models shows that the non-central
gamma provides a good fit to the real life data-set and is therefore recommended
for valuation.