Life Insurance Premiums Research Articles

A note on multiple life premiums for dependent lifetimes

We study the properties of multiple life annuity and insurance premiums for general symmetric and survival statuses in the case when the joint distribution of future lifetimes has a dependence structure belonging to some nonparametric neighbourhood of independence. The size of the neighbourhood is controlled by a single parameter, which enables us to model really weak as well as stronger dependencies. We provide bounds on the difference of multiple life premiums for vectors of dependent and independent future lifetimes with the same univariate marginal distributions. Each such upper bound can be treated as a premium loading related to the strength of lifetimes’ dependence.

Challenges to American Insurance Companies in India

In India, insurance is a national matter in which life insurance and general insurance are yet booming sectors with vast opportunities for different global companies, Life insurance premiums account for 2.5% and general insurance premiums account for 0.65% of India‘s GDP. The Indian insurance sector has gone through several phases and changes, especially after 1999/2000 when the Government of India opened up the insurance sector for private companies to solicit insurance, allowing FDI up to 26%. Since then, the insurance sector in India is considered as a flourishing market amongst global insurance companies. In March 2013, the FDI limit has been raised from 26% to 49%. This long pending step will definitely boost the confidence of global insurers and investors. However, the largest life insurance and general insurance companies in India are still owned by the government. The foreign insurance players are, however, quite capable of grabbing the vast opportunities and successfully meet challenges, if any.

Measuring the Degree of Market Concentration in Thailand Insurance Industry

This paper investigates market structure of life insurance and non-life insurance industry in Thailand. This paper uses the Concentration Ratio and the Herfindahl-Hirschman Index to measure the degree of market concentration. The paper also analyzes various data from all type of insurance premium, balance sheet and income statement to measure the concentration and competition trend. An analysis of life insurance premium, group market is unconcentrated where as ordinary and industry markets are concentrated. As for the life insurance balance sheet and income statement are concentrated market. An analysis of non-life insurance premium, fire, marine and transportation and automobile markets are unconcentrated. As for the non-life insurance balance sheet and income statement are unconcentrated market. In terms of the same sub-categorized product, personal accident and health insurance have difference concentrate degree. Personal accident in life insurance is near monopoly and highly concentrated market while personal accident in non-life insurance is loose oligopoly and moderate concentrated market. Health insurance in life and non-life insurance are tight oligopoly and concentrated market. The results conclude that the life insurance industry is more concentrated than the non-life insurance industry. In both segments of the insurance market, as well as in the overall insurance sector, there is a downward trend in market concentration, which indicates the success of the competition promoting process which allows a greater and better choice for customers.

生命保険の解約返戻金と保険料の関係に係る考察

従来，解約返戻金は保険契約者の持ち分として積立てた金額から一定の控除を行ったものと観念されてきたが，保険法の改正をきっかけに解約返戻金の意義について議論が行われている。しかし，伝統的な生命保険の解約返戻金の性格に係る議論は，現在に至るまで結論がついていない。本稿では，経済学の見地から保険料，保険料積立金，および解約返戻金の関係を分析し，現実的な仮定に基づき試算することによって，次のような結論を導いた。標準責任準備金の導入前の保険料の計算基礎と保険料積立金の計算基礎が一致するという前提のもとでは，解約返戻金は保険契約者の持ち分として積立てた金額から一定の控除を行ったものであった。しかし，標準責任準備金の導入により，保険料の計算基礎と保険料積立金の計算基礎が一致しなくなった後は，解約返戻金は保険契約者の持ち分から一定の控除を行ったものとはいえない。すなわち，解約返戻金を付随的な給付であるとしてきた主たる根拠が成立しなくなった。

Situation and prospects of life insurance market in the Republic of Serbia

In the current business environment, the insurance market in Serbia records a trend of positive, but relatively slow growth. Life insurance market in Serbia, in recent years, shows steady progress, but still lags significantly compared to developed European countries. Poor development of life insurance sector is a direct consequence of the lack of economic development, underdeveloped financial markets, high unemployment rates and inadequate economic reforms. A significant problem is poor education and minimal knowledge of the potential of this type of insurance. The paper is thematically divided into two parts. The aim of this paper is to present the key elements and indicators of life insurance market in Serbia. Emphasis is placed on the presentation of the situation in the region and on the comparison of Serbia with neighboring countries in terms of the volume of life insurance premium. The second part of the paper shows the perspectives of further development of this specific market.

An investigation about joint life policy's premium using Copula; The Case study of an insurance company in Iran

A copula is a function that links univariate marginal's to their full multivariate distribution. Copulas were introduced in 1959 in the context of probabilistic metric spaces. Copula models are becoming increasingly popular for modeling dependencies between random variables. The ranges of their recent applications include such fields as analysis of extremes in financial assets and returns, failure of paired organs in health science, and human mortality in insurance. Our contribution in this paper is to introduce joint life insurance as it is not offered by Iranian insurance companies. We are going to show importance and usefulness of this policy for both insurer and insured. For this reason, we use copula in order to calculate joint life insurance premiums by applying appropriate actuarial formulas using MATLAB and SPSS software. Based on our findings, a joint life insurance premium is lower than the sum of two policies which is bought separately. This means that insurers can charge lower premiums which enable them to increase their market share. On the other hand, lower premiums can increase customer's welfare.

Optimal Portfolio Selection with Life Insurance Under Inflation Risk

This paper investigates a continuous-time optimal consumption, investment, and life insurance decision problem of a family under inflation risk. In the financial market, there is a liquid inflation-linked index bond market which can be utilized to hedge the inflation risk. The explicit solutions for the optimal strategies including consumption rate, investment for each financial asset, and life insurance premium are derived for constant relative risk aversion (CRRA) utility case using martingale approach. The roles of an index bond are investigated and it is verified that they depend on market parameters. We analyze the effects of market parameters on the optimal strategies with focus on the demand for index bond and optimal life insurance premium. Especially, the change of inflation rate has considerable impact on optimal life insurance premium.

Insurance Sector Development and Economic Growth in Azerbaijan

This article will be examine the short relationships between economic growth and insurance sector development in the Azerbaijan economy. The fixed-effect model was adopted and relevant data within the period of 2008 and 2012 were collated and analysed with the use of ordinary least squares (OLS). Gross domestic product (GDP) was adopted as a proxy for the level of economic growth, while numbers of insurance companies (NIC_A), premium of life-insurance (LIP), premium of non-life insurance (NLIP), and inflation rate (INF) were used in measuring insurance sector growth. The insurance companies should also engage in insurance business that is environment and customer friendly, as well as, formulating insurance policies that can accommodate every sector and segment of the economy.

Seasonal mortality for fractional ages in short term life insurance

Fernández-Durán, and Gregorio-Domínguez, Seasonal Mortality for Fractional Ages in Life Insurance. Scandinavian Actuarial Journal. A uniform distribution of deaths between integral ages is a widely used assumption for estimating future-lifetimes; however, this assumption does not necessarily reflect the true distribution of deaths throughout the year. We propose the use of a seasonal mortality assumption for estimating the distribution of future-lifetimes between integral ages: this assumption accounts for the number of deaths that occurs in given months of the year, including the excess mortality that is observed in winter months. The impact of this seasonal mortality assumption on short-term life insurance premium calculations is then examined by applying the proposed assumption to Mexican mortality data.

The dynamic interactions among the stock, bond and insurance markets

This paper explores the lead–lag relationships and the dynamic linkages among stock, insurance and bond markets in the developed countries. This is the first empirical study which sheds light on the extent and magnitude of the association among these financial markets used by the Granger causality test of Toda and Yamamoto (1995), generalized impulse response approach, and generalized variance decomposition in a multivariate setting. Our empirical results illustrate that there are indeed various patterns of dynamic relationships. The direction of causality appears to differ across countries. While investigating these interactive relationships under unexpected shocks, there is a one-way significant influence between the life insurance premium and long-run interest rate. These empirical findings serve as valuable applications not only for investors to diversify their risk away as well as to earn the abnormal return, but also for policy-makers to allocate resources more efficiently.

Investigating the stationarity of insurance premiums: international evidence

This article explores whether there is support for the stationarity hypotheses of life and non-life insurance premiums during the period 1979–2007 for 40 heterogeneous countries. The stationarity of insurance premiums affects insurance companies’ prediction on their future inflow of premium income, which affects the liquidity of insurance companies and their investment plans and thus is relevant to the insurers’ operation. This article employs the advanced nonlinear panel unit-root test with a sequential panel selection method to classify the entire panel into two groups: stationary countries and non-stationary countries. We apply Monte Carlo simulations to derive empirical distributions of the test, which allows us to correct for the finite-sample bias and to consider the cross-country effects. We find relatively stationary life insurance premiums in countries from the following groups: high-income, Europe, and common law origin; relatively stationary non-life insurance premiums exist in the following groups: low-income, Middle East and Africa, and common law origin. Evidence herein shows that different classifications, including income levels, geographic regions, regionally or economically integrated blocs, and legal system, affect the stationarity of life and non-life insurance premiums.

Analysis of life insurance premium in regard to net income as an influencing factor: The case of the Republic of Serbia

During the last few years, life insurance market in Serbia has had an upward trend, however, it still significantly falls back in comparison to developed European countries. This paper presents a projection of life insurance premium on the basis of linear trend parameters and correlation degree between the average net income and the amount of life insurance premium. Additionally, the necessity of intense development of life insurance market is emphasized. The results indicate that development rate of life insurance market in the Republic of Serbia is not sufficient and that there is a significant influence of net income on the amount of life insurance premium.

Do Japanese Policyholders Care About Insurers’ Credit Quality?

We analyse abnormal growth of premiums surrounding financial strength rating changes for a panel of life insurers in Japan during 2002–2009. Unlike the U.S. market, our regression results indicate that life insurance premiums do not show relevant change in connection with ratings changes in the Japanese market. However, insurance demand is not totally insensitive to the financial strength of insurers. We find that the demand for foreign life insurers has a positive relationship with solvency margin ratio. We also find that consumers cared more about insurers’ credit quality during the later sample period of 2006–2009 than the earlier sample period of 2002–2005.

A proposal to apply the Kiwi-VAT to insurance services in the European Union

In the spirit of the European Commission’s call for a simpler, more robust and efficient VAT system, this article proposes to integrate exempt insurance services into the European VAT, and to abolish the discriminatory, excise-type insurance premium taxes levied by the various Member States. The current VAT exemption (no taxation of insurance services and no credit for the VAT on inputs) is administratively complex and economically distortionary. Instead, the value added of property and casualty insurance companies can be taxed on a transactions basis by applying the VAT to insurance premiums (creditable by VAT-liable businesses) and allowing a presumptive tax credit for the VAT imputable to payouts (plus a credit for the actual VAT on purchases). The presumptive tax credit should be taxed at the level of business recipients, but individuals would receive the VAT along with indemnity payments without having to file a return. Exceptionally, the tax-credit VAT would not be applied to life and health insurance premiums, but insurers would be taxed on an accounts basis on the sum of wages and business cash flow.

Insurance sector development and economic growth in Nigeria

This article examined the short and long-run relationships between economic growth and insurance sector development in the Nigerian economy. The fixed-effect model was adopted and relevant data within the period of 1985 and 2009 were collated and analysed with the use of co-integration analysis. Gross domestic product (GDP) was adopted as a proxy for the level of economic growth, while numbers of insurance companies (NIC), premium of life-insurance (PLI), premium of non-life insurance (NLP), total insurance investment (TII), and inflation rate (INF) were used in measuring insurance sector growth. The findings revealed that insurance sector growth and development positively and significantly affects economic growth. The coefficient of multiple determinations denoted as R2 with a value of 0.87 showed that about 87% variation in the dependent variable was explained by the explanatory variables while the remaining 13% was explained by the stochastic variables. The result of the Granger causality test also revealed that the extent of influence the insurance sector growth had on economic growth was limited and not direct because of some cultural, attitudinal traits and values in the country. It was recommended that government should create a good environment for insurance activities in Nigeria. The insurance companies should also engage in insurance business that is environment and customer friendly, as well as, formulating insurance policies that can accommodate every sector and segment of the economy. Key words: Insurance, economic growth, fixed-effect model, Granger-causality test, co-integration.

The link between life insurance activities and economic growth: Some new evidence

This paper applies the panel seemingly unrelated regressions augmented Dickey-Fuller (SURADF) test to re-investigate the stationarity properties of real life insurance premiums per capita and real gross domestic product (GDP) per capita for 41 countries within three levels of income covering 1979–2007. Our empirical results first reveal that the variables in these countries are a mixture of I(0) and I(1) processes, and that the traditional panel unit-root tests could lead to misleading inferences. Second, for the estimated half-lives, the degrees of mean reversion are greater in high-income countries. Third, there is concrete evidence favoring the hypothesis of a long-run equilibrium relationship between real GDP and real life insurance premiums after allowing for the heterogeneous country effect. The long-run estimated panel parameter results indicate that a 1% increase in the real life premium raises real GDP by 0.06%. Finally, we determine that the development of life insurance markets and economic growth exhibit long-run and short-run bidirectional causalities. These findings offer several useful insights for policy-makers and researchers.

Problems with Using CDS to Infer Default Probabilities

Using credit default swaps (CDS) to imply a firm’s or sovereign’s default probability is laden with difficulties, making the resulting estimate unreliable. This article exposes these difficulties using a simple analogy to life insurance premiums. An analogy is used because the logic is more easily understood in this context. The difficulties are unraveling the impact of risk premium, counterparty risk, market frictions, and strategic trading. Given a well-understood alternative to implied CDS default probabilities is available, actuarial-based default probabilities, banking regulations and risk management decisions should not be based on CDS implied default probabilities.

Analysis of Mortality In Republic of Macedonia

Calculations of the life insurance premium depends on values in mortality tables. Mortality tables can be modeled by using different functions for mortality analysis. Mortality tables give different values for both genders, and they differ from one decade to the following one. Those differences can very distinctive. Hence, the insurers should use the updated mortality tables and forecasting of future values of mortality. There are many different models of identification of mortality functions and models for forecasting. In this paper we use Azbel model and possibilities it gives for identification and forecasting future values of mortality. The Azbel model is also compared with time series analysis model. Data are taken for the mortality in Republic of Macedonia.

Criterios de cuantificación indemnizatoria en accidentalidad vial: una propuesta de política judicial

La accidentalidad vial, es la segunda causa de muerte violenta en Colombia, fuente de danos materiales y morales en las personas. Las normas de responsabilidad civil obligan al propietario o conductor a responder civil y penalmente por sus consecuencias. El problema de accidentalidad y de la cuantificacion de indemnizaciones, reviste gran interes por el alto numero de procesos que por homicidios en accidentes de transito cursan en el Distrito Judicial de Cali. En la investigacion realizada en la Escuela de Ingenieria Estadistica de la Universidad del Valle, se efectuo recoleccion de expedientes y se aplico una encuesta de tipo cuestionario para indagar sobre la politica judicial que se uso en el calculo de indemnizaciones en Juzgados Penales del Circuito de Cali, donde se observa gran disparidad en los criterios de reparacion. Tampoco se contempla un modelo estandar para cuantificar los perjuicios tanto materiales como morales y no hay evidencia de una politica baremada; por tanto, el estudio intenta brindar un marco de referencia para proponer a Jueces y Fiscales, un modelo de regresion multiple en el cual se consideran caracteristicas socioeconomicas de victimas, perjudicados y procesados, con el fin de unificar criterios de cuantificacion que fijen el monto de la reparacion economica a los perjudicados, sus herederos. El modelo resultante propone criterios utilizados por las companias de seguros para fijar las primas de seguro de vida, tales como: el tiempo de vida y el nivel de ingresos del occiso, y responsabilidades con su grupo familiar.

The impact of real income on insurance premiums: Evidence from panel data

This study applies a recently-developed panel smooth transition regression (PSTR) model and takes into account the potential endogeneity biases in order to establish country-specific and time-specific elasticities of insurance premiums with respect to real income for 36 selected countries from the period 1979–2007. The PSTR model endogenously determines the non-linear insurance-income nexus and allows for a continuum of an intermediate regime among extremes. We find overwhelming evidence in support of a non-linear income threshold. The life and non-life insurance premiums are inelastic and elastic with respect to real income, suggesting that they are a necessary good and luxury good respectively. Furthermore, as time goes on, the income elasticities of insurance premiums present a similar upward trend, implying that the impact of economic development on insurance premiums is more important in recent periods.