Life Insurance: Pricing

Massimiliano Maggioni and Giuseppe Turchetti
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Massimiliano Maggioni: University of Milano
Giuseppe Turchetti: Sant’Anna School of Advanced Studies

Chapter 13 in Fundamentals of the Insurance Business, 2024, pp 297-320 from Springer

Abstract: Abstract The aim of this chapter is to explain the calculation of insurance premium in life insurance. The premium is determined by two factors: financial factor and demographic factor. The financial factor depends on the expected value of the economic disbursement foreseen when an event occurs. This event is based on the duration of human life, due to death or survival of one insured. Additionally, it takes into account the interest generated between when it is paid and when any performance is met. The demographic factor is based on mortality tables, which contain the rate of mortality and likelihood of survival. The combination of these two factors defines the first level of premium. A safety loading is then added to this premium. Then further explicit loadings are charged. They have the purpose of covering management expenses and acquisition costs of the contracts. In the paragraphs that follow, the classification of life insurance on the basis of performance is explained. The actuarial formulas for Capital performance insurance products (term life and deferred capital) are explained. In the end, the actuarial formulas for annuity insurance products are detailed.

Keywords: Mortality tables; Population tables; Selected tables; Statistical basis; Demographic basis; Technical rate; Current value; Expected current value; Actuarial value; Just premium; Principle of equity; Pure premium; Technical basis; Safety loading; Rate of safety loading; Demographic–financial tables; Self-selection; Additive impairment method; Multiplicative impairment method; Lexis point; Rectangularisation; Term Life (TL); Deferred Capital (DC); Ordinary mixed; Capitalisation; Immediate annuity; Deferred annuity; Acquisition expenses loading; Collection expenses loading; Management expenses loading; Loading for remuneration of own capital; Management fee; Taxable premium (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-319-52851-9_13

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DOI: 10.1007/978-3-319-52851-9_13

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