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Profit Testing Analysis Of Life Insurance And Family Takaful Products Using Unisex Rates
Date Issued
2018-03
Author(s)
Siti Wafiah Hanin binti Mohd Zulkifli
Abstract
Gender is one of the good predictor of risks in insurance and Takaful businesses as
it represents the mortality rates of the individuals separately between males and females. However, European countries believed that gender can be omitted and there should not be discrimination towards gender in insurance practice. Hence, the unisex rate has been enforced and the use of gender in premium pricing is strictly prohibited starting from 21St December 2012 for some European countries. This study intends to develop unisex mortality rates based on the current mortality rates and observe the profitability of the insurer after the implementation of unisex rates towards insurance and Takaful products in Malaysia by using profit testing. This is done by calculating unisex rate and model the profit test by using Visual Basic Programming (VBA). M9903 - Male and M9903- Female will be used to construct the unisex mortality table and the assumptions are set up to compute the insurer's profitability. Profit testing involves few profit measures such as Net Present Value (NPV), Payback Period (PBP) and Profit Margin (PM). The results show positive profit and that companies can consider applying unisex rates in their premium or contribution pricing.
Keywords: Insurance and Takaful, Profit Testing, Unisex Rate, Visual Basic
Programming
it represents the mortality rates of the individuals separately between males and females. However, European countries believed that gender can be omitted and there should not be discrimination towards gender in insurance practice. Hence, the unisex rate has been enforced and the use of gender in premium pricing is strictly prohibited starting from 21St December 2012 for some European countries. This study intends to develop unisex mortality rates based on the current mortality rates and observe the profitability of the insurer after the implementation of unisex rates towards insurance and Takaful products in Malaysia by using profit testing. This is done by calculating unisex rate and model the profit test by using Visual Basic Programming (VBA). M9903 - Male and M9903- Female will be used to construct the unisex mortality table and the assumptions are set up to compute the insurer's profitability. Profit testing involves few profit measures such as Net Present Value (NPV), Payback Period (PBP) and Profit Margin (PM). The results show positive profit and that companies can consider applying unisex rates in their premium or contribution pricing.
Keywords: Insurance and Takaful, Profit Testing, Unisex Rate, Visual Basic
Programming