Group Life Assumptions.docx - Solution for Task 1 To Bob...

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Solution for Task 1To: BobSubject: Summary of Major Categories of Group Life AssumptionsAccording to group life assumptions, the more important categories are experienced-based and demographic assumptions as compared to economic assumptions. This is because most products of group life are renewable annually while guaranteeing one year rate. This categorization of the assumptions is obtained from section 2 of FAP module 7. The primary economic assumptions which have had great impact to the business is the strength of the economy with the levels of employment in the insured organisation. The landscape of investment as well affects the company in terms of earnings; however, most of it is on short term basis which matches the period of the organizations liabilities. One the main demographic assumption is the rate of mortality based on gender and age. Most of the assumptions of the company are majorly based on the SOA GreenCo case studies. Mortality adjustment assumptions are determined based on the data presented by the industry. Despite this being the key assumption for life insurance, it is stable for long term basis generally for large corporations and organizations.Assumptions made on basis of experience are linked particularly to the insured members. Our primary rating elements are based on the industry whether white or blue collar, size of the group and area. When considering torate a specific group, setting aside the current claims of the estimated cost of experience, the most important element is demographics which include industry, age, and gender. Also, it is essential to determine whether the plan for the insurance is contributory or it is non-contributory based on the eligibility of the group members in the scheme. The essential pricing element is determination of the estimated cost of the claim made by a member. The critical value of this is on the basis of the assumption made on mortality. If the future mortality is underestimated by the actuary, the business block in this particular case might not be viable of profitable.
Solution for Task 2E-mail to BobTo: BobSubject: Group Life Assumptions ConstraintsThere are no specific constraints on regulations for our model of pricing of group life formally, but there are various constraints based on the data. First, the department of actuaries is required to be guided by the provided professional standards in the industry. Any of the data which will be used for purposes of modeling need to be reasonable and relevant for analysis. It is important for the data to be reviewed to ascertain materiality as well as quality. The most essential assumption is the table of mortality. To set the table properly we need to be aware of the rates of mortality primarily utilizedfor preservation, for reporting purposes on taxation, and income imputed rates by IRS which are quite interactive with our table used for pricing.

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