Life Insurance Contracts Research Articles

Zaštita prava potrošača kod ugovora o osiguranju života

Life insurance is a special type of activity exerting a strong influence on a country's social and economic structure. Its main field of interest is human life. Life insurance contracts are founded on the basis concept of the legal position of an insured person as the weaker contracting party either due to his/her knowledge of the insurance service and the circumstances surrounding it or due to his/her negotiating position and the financial means put at his/her disposal. The insurer is a trader and professional, which cannot be said for the insured person, who, accordingly, should be ensured protection within the current legal framework. In that sense, it is essential the security and protection of the insurance beneficiary to be provided against all the risks and irregular actions which can be anticipated and prevented. In accordance with the importance of its topic, the paper touches upon the term and characteristics of life insurance contracts. It also includes the definition of life insurance and legal aspects of life insurance contracts, all of which to be followed by a detailed elaboration on the selected topic of the paper, which is reflected in its subtitle-the analysis of consumers (insurance beneficiaries) protection in insurance contracts generally speaking and in life insurance contracts in particular.

Математичне моделювання динаміки страхової компанії на основі макропоказників

In the paper we investigate the dynamics of a life insurance company depending on changes in macro indicators. For the sensitivity study, profitability testing is performed for the average life insurance contract. Profitability testing is based on an estimate of the expected present value of future cash flows. Various approaches to the choice of discount rates are investigated. The choice of strategy for using the rates of the zero-coupon yield curve built on the UAH domestic government bonds is substantiated. The dependence of the zero-coupon yield curve on the change in the key rate is shown. The dynamics of the model at different levels of the interest rates, namely guaranteed investment income, average profitability of investment activity, key rate, is considered. The scenario of the predicted decrease in the key rate at the stage of post-war reconstruction of Ukraine is considered. The profitability of the insurance company was tested based on the macro parameters of the specified scenarios. The expediency of using the chosen approach for researching the dynamics of a life insurance company in the conditions of the current high volatility of the Ukrainian economy is shown.

EMPOWERING FUTURES: AN IN-DEPTH STUDY OF LIFE INSURANCE DEMAND IN NIGERIA

This study investigates the factors influencing Nigeria’s demand for life insurance policies. Through a comprehensive review of relevant literature, the research establishes objectives centered on assessing the awareness of life insurance policies among Nigerians, examining the relationship between awareness and policy demand, and identifying barriers to life insurance contract adoption. Employing a sample survey research design, the study focuses on present and potential life insurance policyholders associated with registered insurance companies in Lagos State. Using convenience sampling, 200 respondents were selected based on their insurance awareness, policy type, and ownership duration. The findings underscore the impact of insurance awareness on policy demand and highlight factors like age, health status, income, occupation, family size, and education affecting low patronage. Media plays a crucial role in awareness creation, yet trust issues and limited knowledge hinder industry growth. The study concludes with recommendations to address income-based barriers, conduct aggressive awareness campaigns, and enhance customer understanding of life insurance benefits.

EMPOWERING FUTURES: AN IN-DEPTH STUDY OF LIFE INSURANCE DEMAND IN NIGERIA

This study investigates the factors influencing Nigeria’s demand for life insurance policies. Through a comprehensive review of relevant literature, the research establishes objectives centered on assessing the awareness of life insurance policies among Nigerians, examining the relationship between awareness and policy demand, and identifying barriers to life insurance contract adoption. Employing a sample survey research design, the study focuses on present and potential life insurance policyholders associated with registered insurance companies in Lagos State. Using convenience sampling, 200 respondents were selected based on their insurance awareness, policy type, and ownership duration. The findings underscore the impact of insurance awareness on policy demand and highlight factors like age, health status, income, occupation, family size, and education affecting low patronage. Media plays a crucial role in awareness creation, yet trust issues and limited knowledge hinder industry growth. The study concludes with recommendations to address income-based barriers, conduct aggressive awareness campaigns, and enhance customer understanding of life insurance benefits.

Characteristic features of the operation of the insurance market of Ukraine in the conditions of martial law

The purpose of the article is to analyze the current state of the insurance market of Ukraine and highlight the peculiarities of its functioning. The relevance of the research is driven by the changes in the structure and functioning mechanisms of this market, associated with the introduction of a new model of its regulation.
 The article defines the essence of the insurance market and its main functions. The current state of the insurance market of Ukraine was reviewed, the main indicators of its development were analyzed with the determination of the reasons for their changes for the period 2019­2022. The most significant trends in the market of insurance services were characterized, among which the follo wing are highlighted: a decrease in the volume of gross insurance premiums; reduction of the number of insurers; increase in the level of insurance payments; decrease in the insurance penetration rate.
 Market problems were identified, the main ones being the low solvency and liquidity of insurers; imperfection of insurers’ business models; lack of market transparency andproblems in corporate governance; lack of a mechanism for guaranteeing insurance payments under long-term life insurance contracts; low demand for insurance services due to distrust in the opaque insurance market and low solvency of the population.
 The peculiarities of the insurance market of Ukraine related to the change of the regulator and the beginning of reform are characterized. The main elements of the new insurance market regulation model, built on the principles of the International Association of Insurance Supervisors (IAIS) and the provisions of the European Union directives, are reviewed.
 The basic norms of the new Law of Ukraine “On Insurance”, which will come into effect on January 1, 2024, have been considered. It was concluded that the preparation of the law took into account numerous proposals of scientists to increase the efficiency of the functioning of the insurance market. It was emphasized that the introduction of a new model of regulation and supervision of the insurance market and improvement of the legislative support for reforms will allow solving a number of existing problems in domestic insurance.

The GMWB guarantee embedded in Life Insurance Contracts: Fair Value Pricing Problem

Due to the complexity of the variable annuities products, we rely on numerical resolution to fairly price the guaranteed minimum withdrawal benefit (GMWB) rider. This policy, known as an embedded put option in the life insurance contracts, gives the contract owner the possibility to withdraw a fixed amount for a fixed period. We assume a single premium payment upfront. We use a Monte Carlo simulation to approximate the fair fees under specific assumptions related to the contract design and conception, the policyholder characteristics and lapse behavior, and different market parameters. More notably, our algorithm allows to perform a sensitivity analysis to seek the impact of different parameters on the value of the policy as recommended by the Solvency II regularities. We find that the GMWB fair fees are intensively sensitive and responsive to any sudden change in the contract inputs.

Gloss to the Judgment of the Court of Justice of the European Union of 24 February 2020 in Joined Cases C-143/20 and C-213/20 on the Information Disclosure of Life Insurance Undertakings in Unit-linked Insurance Contracts

The gloss refers to the judgment of the Court of Justice of the European Union of 24 February 2020 in joined cases C-143/20 and C-213/20 concerning information disclosure of life insurance undertakings in unit-linked life insurance. This judgment provides guidance on information obligations in this type of insurance with respect to entities whom the information is to be communicated and as regards the scope of the information provided. Said issues seem to be essential for insurance practice, yet they fail to be clearly defined by legislation in force or in case law. The gloss does not address all the questions that have been submitted to the Court, focusing only on the scope of the information obligations in unit-linked life insurance contracts.

COVID-19 accelerated mortality shocks and the impact on life insurance: the Italian situation

AbstractThe Covid-19 pandemic caused an alarming mortality stress. The evidence shows that a significant proportion of people who die from Covid-19 are in a frail state. According to this consideration, we assume that the mortality shocks are related to a group of the individuals with some co-morbidities at Covid-19 diagnosis. In other words, the mortality shocks present a specific characterisation, which consists of a causal connection with pre-existing conditions, and the phenomenon could be described as a mortality acceleration. In this paper, an Accelerated Mortality Model is proposed in order to capture the different effects on mortality that depend on the evolution of the pandemic and the presence of co-morbidities at diagnosis. Furthermore, we assess the impact of Covid-19 mortality acceleration on a set of traditional life insurance contracts. We observe that, although mortality acceleration by Covid-19 affects more markedly the elderly and unhealthy sub-populations, it could be considered as a temporary shock with a limited impact on the life insurance market.

Impact of rough stochastic volatility models on long-term life insurance pricing.

The Rough Fractional Stochastic Volatility (RFSV) model of Gatheral et al. (Quant Financ 18(6):933–949, 2014) is remarkably consistent with financial time series of past volatility data as well as with the observed implied volatility surface. Two tractable implementations are derived from the RFSV with the rBergomi model of Bayer et al. (Quant Financ 16(6):887–904, 2016) and the rough Heston model of El Euch et al. (Risk 84–89, 2019). We now show practically how to expand these two rough volatility models at larger time scales, we analyze their implications for the pricing of long-term life insurance contracts and we explain why they provide a more accurate fair value of such long-term contacts. In particular, we highlight and study the long-term properties of these two rough volatility models and compare them with standard stochastic volatility models such as the Heston and Bates models. For the rough Heston, we manage to build a highly consistent calibration and pricing methodology based on a stable regime for the volatility at large maturity. This ensures a reasonable behavior of the model in the long run. Concerning the rBergomi, we show that this model does not exhibit a realistic long-term volatility with extremely large swings at large time scales. We also show that this rBergomi is not fast enough for calibration purposes, unlike the rough Heston which is highly tractable. Compared to standard stochastic volatility models, the rough Heston hence provides efficiently a more accurate fair value of long-term life insurance contracts embedding path-dependent options while being highly consistent with historical and risk-neutral data.

PELUANG TRANSISI PADA PENENTUAN PREMI TUNGGAL BERSIH ASURANSI JIWA BERJANGKA

A life insurance contract contains the amount of funds that must be paid by insured as a responsibility for a received compensation. There funds are called as premium. Payment of the premium which paid with one payment at the beginning of the contract time called as net single premium. One factor that influenced the calculation of life insurance premiums is a life probability. In general, a life probability constructed by the assumption that death only involves two conditions, life and death. Yet, there are another condition for the insured that also affect a person’s death condition which is sick. The objecktive of this research is to determine net single premium of term life insurance formula using transition probability as a life probability. The first will constructed transition from three condition which are health, sick, and death as stochastic process. Transition probability will be determined by solving Chapman Kolmogorov system differential equation. Then the probability transition that determined will be used for calculate net single premium from term life insurance. Net single premium will be determined by using expectation value of present value of benefit random variables. From this research get formula of net single premium of term life insurance contains discount function, transition probability, and force of mortality of someone.

Temporal Clustering of the Causes of Death for Mortality Modelling

Actuaries utilize demographic features such as mortality and longevity rates for pricing, valuation, and reserving life insurance and pension contracts. Capturing accurate mortality estimates requires factual mortality assumptions in mortality models. However, the dynamic and uncertain nature of mortality improvements and deteriorations necessitates better approaches in tracking mortality changes, for instance, using the causes of deaths features. This paper aims to determine temporal homogeneous clusters using unsupervised learning, a clustering approach to group causes of death based on (dis)similarity measures to set representative clusters in detection and monitoring death trends. The causes of death dataset were derived from the World Health Organization, Global Health Estimates for males and females, from 2000 to 2019, for Kenya. A hierarchical agglomerative clustering technique was implemented with modified Dynamic Time Warping distance criteria. Between 6 and 14 clusters were optimally achieved for both males and females. Using visualisations, principal clusters were detected. Over time, the causes of death trends of these clusters have demonstrated a correlated association with mortality and longevity rates, rationalizing why insurance and pension offices may include this approach as a preliminary step to undertake mortality and longevity modelling.

Premija osiguranja života i Covid-19

Insurance, as a source of society's aspirations, represents the association of all those who are exposed to the same danger. The coronavirus pandemic has affected various aspects of life, including the insurance industry. Life insurance is one of the types of insurance where the obligations of insurance companies to policyholders have increased during the coronavirus pandemic. The paper analyzes the normative complex of the insurance premium with the specifics and characteristics of this topic. We consider it important to comprehensively explain the premium as an essential element of the life insurance contract. The analysis includes how the coronavirus pandemic is affecting life insurance premiums. This period of change could be a turning point and lead to transformational changes in the life insurance industry. Those who are able to adapt quickly to changes in the environment, who prioritize the insurance consumer and who see this crisis as an opportunity to start from scratch and fundamentally rethink the way they do business will quickly find their place when things calm down.

Problems of law application of the voluntary life insurance contract at the signing of credit agreements

Рассматриваются особенности реализации добровольного договора страхования жизни при вступлении в кредитные отношения. Выявлены проблемы, возникающие у граждан при заключении подобного рода договора. Проанализированы пути решения, выработанные судебной практикой и уполномоченными органами.

Ban on Distributing Certain Unit Linked Life Insurance Contracts as the Supervisory Product Intervention of the Polish Financial Supervision Authority (PFSA)

The article aims at discussing practical aspects of a legal regulation providing the European Supervisory Authorities (ESAs) and national supervisory authorities with the power to apply supervisory product intervention measures, particularly for insurance investment products. In addition to presenting the essence of product decisions, the author outlines the legal basis for product intervention powers of both the EU and national supervisory authorities related to unit linked life insurance contracts. Moreover, the article analyses the reasons and contents of the product decision issued by the Polish Financial Supervision Authority regarding the ban on distributing certain unit linked life insurance contracts, with the ban being effective from January 1, 2022.

Life insurance surrender and liquidity risks

Surrender options in endowment life insurance contracts can result in a surrender risk for the insurer. This risk is closely related to investment and liquidity risks. Consequently, the surrender risk is underestimated if it is assessed without consideration of all major risk sources. Using different risk measures, this paper shows that the surrender risk increases if the liquidity constraint is considered. Additionally, in an extreme event, mass surrender and a liquidity crisis can trigger each other. Therefore, the surrender risk could grow even faster. In this case, the solvency capital calculated within the Solvency II regime may not be enough to provide the intended protection. Furthermore, if policyholders surrender their contracts rationally, insurers face an even higher default threat.

A machine learning model for lapse prediction in life insurance contracts

We use the Random Forest methodology to predict the lapse decision of life insurance contracts by policyholders. The methodology outperforms the logistic model, even if features interactions are considered. We use global and local interpretability tools to investigate how the model works. We show that non-economic features (the time passed from the incipit of the contract and the time to expiry, as well as the insurance company and its commercial approach) play a significant effect in determining the lapse decision while economic/financial features (except the disposable income growth rate) play a limited effect. The analysis shows that linear models, such as the logistic model, are not adequate to capture the heterogeneity of financial decisions.

A Bridge between Local GAAP and Solvency II Frameworks to Quantify Capital Requirement for Demographic Risk

The aim of this paper is to provide a stochastic model useful for assessing the capital requirement for demographic risk in a framework coherent with the Solvency II Directive. The model extends to the market consistent context classical methodologies developed in a local accounting framework. The random variable demographic profit, defined in literatue under local accounting principles, is indeed analysed in a Solvency II framework. We provide a unique formulation for different non-participating life insurance contracts and we prove analytically that the valuation of demographic profit can be significantly affected by the financial conditions in the market. Regarding this topic, we implement the Vašíček model to add randomness to risk-free rates. A case study has also been developed considering a portfolio of life insurance contracts. Results prove the effectiveness of the model in highlighting the main drivers of capital requirement evaluation (e.g., the volatility of both mortality rates and risk-free rates), also compared to the local GAAP framework.

Fourier based methods for the management of complex life insurance products

This paper proposes a framework for the valuation and the management of complex life insurance contracts, whose design can be described by a portfolio of embedded options, which are activated according to one or more triggering events. These events are in general monitored discretely over the life of the policy, due to the contract terms. Similar designs can also be found in other contexts, such as counterparty credit risk for example. The framework is based on Fourier transform methods as they allow to derive convenient closed analytical formulas for a broad spectrum of underlying dynamics. Multidimensionality issues generated by the discrete monitoring of the triggering events are dealt with efficiently designed Monte Carlo integration strategies. We illustrate the tractability of the proposed approach by means of a detailed study of ratchet variable annuities, which can be considered a prototypical example of these complex structured products.

Durability of the Life Insurance Contract in the Light of Requirements Related to Anti-Money Laundering and Counteracting the Financing of Terrorism (AML/CFT requirements

According to Article 830 § 3 of the Civil Code, the insurer may terminate a life insurance contract only in cases specified in the law. In the current legal framework, it is assumed that no civil law regulations give the insurer the possibility to terminate the life insurance contract. However, it is not clear whether the durability of a life insurance contract is subject to change in the light of public law AML/CFT regulations, i.e. where the insurer is unable to implement any financial security measures laid down in the legislation regarding customer due diligence. This article attempts to answer the question whether the principle of the protection of life insurance durability stipulated by law takes precedence over the insurer’s obligations resulting from AML/CFT regulations, and whether this principle could lead to the insurer’s exposure, as an obligated institution, to the risk of infringing AML/CFT regulations

Expert Study of the Execution of the Terms of an Investment Life Insurance Contract

A significant decrease in bank deposits’ profitability forces citizens to look for more profitable investment options, including purchasing various financial products. One such product is an investment life insurance contract. However, investors’ expectations are not always fully met since dealing with financial instruments, such as options, requires a certain of financial literacy, understanding of the futures stock market’s organization and functioning. Arising disputes are often resolved in court. To obtain answers to economical questions, a forensic examination is appointed and carried out.Forensic analysis on this topic has some features that are discussed in the article. The paper gives a list of objects for expert research and their brief characteristics. The main sources of reference information on quotations of financial instruments are provided. Some concepts and economic categories related to the stock market and derivatives are considered. The Russian and English terms used by the experts during the study are presented and explained.Using an example from expert practice, the authors explain the logic of the analysis of an option contract and show the sequence of actions that makes it possible to calculate the investment income amount. The article justifies the conditions that restrict the experts when carrying out calculations and should be taken into account when forming and studying the expert opinions.