A Linear Pricing Model for Life Insurance Policies

Abstract:     
Life insurance products are priced according to two reciprocal requirements. As finacnial products, they must yield returns to investors, but decreasingly so with increased risk exposure. On the other hand, they must be priced to reflect the providers’ risk exposure. Thus, the pricing and returns of life insurance products depend on the underlying risk exposure.

This study proposes a linear model for the pricing of life insurance policies. The proposed model provides an approach for comparing different types of life insurance products, enabling investors to choose between products.

Number of Pages in PDF File: 10

Keywords: life insurance products, risk exposure, premia

JEL Classification: G22

working papers series