This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: ACTL3002/5105 Life Insurance and Superannuation Models Tutorial 7 Questions, Semester 1, 2011 1. A life insurance issues an endowment insurance with a term of five years to a life aged exactly 55. The sum insured is $100 , 000, payable at the end of the five years, or at the end of the year of death, if earlier. Premiums are payable annually in advance throughout the term of the policy. The insurer assumes that initial expenses will be $300 and renewal expenses, which are incurred at the beginning of the second and subsequent years of the policy, will be $30 plus 2 . 5% of the premium. The funds invested for the policy are expected to earn 7 . 5% p.a., and mortality is expected to follow the AM92 Select life table. The company holds net premium reserves, calculated using AM92 Ultimate mortality and interest of 4% p.a. The insurer sets premiums so that the net present value of the profit on the contract is 15% of the annual premium, using a risk discount rate of 12% p.a. (a) Calculate the annual premium. (b) Without carrying out any further calculations, state with brief resaons what the effect on the premium would be in each of the following cases: (i) The reserves are calculated using a lower rate of interest; (ii) The insurer uses a risk discount rate of 15%; and (iii) Mortality is assumed to be AM92 Ultimate.(iii) Mortality is assumed to be AM92 Ultimate....
View Full Document
This note was uploaded on 06/12/2011 for the course ASB 1001,2522, taught by Professor Nicole during the One '09 term at University of New South Wales.
- One '09