Decoding the Profitability of Insurance Products: A Novel Approach to Evaluating Non-Participating and Participating Insurance Policies

Chih-Te Yang, Yensen Ni (), Mu-Hsiang Yu, Yuhsin Chen and Paoyu Huang
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Chih-Te Yang: Department of Business Administration, Tamkang University, New Taipei City 251301, Taiwan
Yensen Ni: Department of Management Sciences, Tamkang University, New Taipei City 251301, Taiwan
Mu-Hsiang Yu: Department of Management Sciences, Tamkang University, New Taipei City 251301, Taiwan
Yuhsin Chen: Department of Accounting, Chung Yuan Christian University, Taoyuan 320314, Taiwan
Paoyu Huang: Department of International Business, Soochow University, Taipei 100006, Taiwan

Mathematics, 2023, vol. 11, issue 13, 1-16

Abstract: This study presents a novel approach to analyzing the present value of total profit for non-participating and participating insurance policies in order to determine the optimal profitability of non-participating and participating insurance policies based on applying the approach used in operations research to the field of finance. As such, a comprehensive insurance product evaluation model was developed using both mathematical models and numerical analysis to evaluate the demand for non-participating and participating life insurance policies in response to changes in interest rates. The findings indicate that non-participating life insurance policies offer greater solvency for insurance companies compared to participating policies. The study also highlights the significance of spontaneous and induced demand in determining the total profit of both types of policies. The study concludes that life insurance companies should focus on generating spontaneous consumer demand, reducing induced demand, and implementing the optimal pricing strategy to achieve maximum profits.

Keywords: traditional life policy; non-participating policy; participating policy; induced demand; optimal pricing strategy; maximum profits (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
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