Finance and Credit

An economic and mathematical model to calculate the insurance tariffs of partners

Vol. 23, Iss. 32, AUGUST 2017

Received: 18 May 2017

Received in revised form: 9 June 2017

Received in final form: 7 July 2017

Accepted: 25 July 2017

Available online: 29 August 2017

Subject Heading: Insurance

JEL Classification: C02

Pages: 1944–1954

Chistyakova N.A. Plekhanov Russian University of Economics, Moscow, Russian Federation

Sukhorukova I.V. Plekhanov Russian University of Economics, Moscow, Russian Federation

Subject The article addresses actuarial system of control and management in the sphere of risk insurance.
Objectives The purpose of the article is to provide methodological justification and develop an economic and mathematical model to calculate net rate of insurance coverage payment to a partner (living spouse) in the event of death of another partner (spouse) prior to his/her retirement age.
Methods We use the actuarial techniques of calculating insurance tariffs based on mathematical and simulation methods. The paper presents an economic and mathematical model to calculate insurance tariffs for personal life insurance, assuming that the insured are spouses and one of them is a beneficiary. The calculations rest on methods of the theory of probability, actuarial mathematics, numerical methods and methods of simulation modeling, when required.
Results We offer an analytical form of the rate of insurance coverage payment to a living partner in the event of death of another prior to his or her retirement age. It depends on interest rate, age of spouses, remaining time before pension, mortality rate, and maximum permissible age. We also calculated the probability of obtaining insurance coverage by each of the partners and the value of the contract (mathematical expectation of insurer's costs) at the contract date.
Conclusions The findings enable to obtain analytical forms for probability of joint project termination as a result of the other partner's actions, as well as for calculating insurance tariffs in the form of one-off payment.

Keywords: insurance tariff, net rate, whole life insurance policy, interest rate, survival function


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