Pricing Joint-life Insurance Under Dependent Assumption
Open Access
- Author:
- Kwon, Youjin
- Area of Honors:
- Actuarial Science
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Ron Gebhardtsbauer, Thesis Supervisor
Ron Gebhardtsbauer, Thesis Honors Advisor
Evan Garrett Morgan, Faculty Reader - Keywords:
- Joint-life
Assumption
Dependence - Abstract:
- Actuaries make multiple assumptions such as the mortality assumption when pricing insurance. Studying the mortality of the population is important since the price of the same insurance product can vary depending on the mortality assumption. This paper will first introduce different mortality assumptions and how they affect the price of insurance, especially joint-life insurance. Joint-life insurance is insurance with coverage of two or more people and its death benefit is paid when the first death occurs. The most popular form of joint-life insurance is insurance for couples, often married. Therefore, this paper will focus on joint-life insurance that covers couples. Actuaries use joint-life mortality when pricing joint-life insurance. Joint-life mortality is more complicated and less developed than single life mortality. To simplify the complex calculations of joint-life mortality, many actuaries today assume that the deaths of couples are independent. However, recent studies show that they may not be completely independent but somewhat dependent. A close examination of the correlation that exists between couples’ deaths can help insurance companies to improve their pricing of joint-life insurance products.