You are an actuarial student working in the life product development area of Storrs Life Insurance Company (SLIC). Storrs Life has been selling a 10-year Yearly Renewable Term Insurance (YRT) product for some time now, and has a considerable record of company experience for this product. You have an excel file on Husky CT which contains our current pricing assumptions and YRT premium rates for a female Age 50 non-smoker. On this file you will find our best estimate mortality rates, the Statutory mortality rates, and the current YRT premiums that we charge a female age 50 non-smoker.
All other best estimate assumptions-such as face amount, are the same as those we used in class for a male age 45 non-smoker. You should build these assumptions into your model to produce a pricing model for a female age 50 non-smoker for our current YRT product. These are the premium rates and assumptions for the product we currently sell and we are not intending to change them at this time. However, as discussed below, you will still need to perform sensitivity tests on several key pricing assumptions in order to complete your assignment.
Storrs Life major competitors have introduced Level Premium Term life products, and the popularity of this design has been cited as a cause for the declining sales numbers at SLIC. One key competitor in particular is selling the Level Premium product at a price of $3.18 per thousand of face amount for females age 50 who are non-smokers. Now you are being asked to write a report justifying your opinion as to whether or not Storrs Life should begin to sell a level premium term product, and, if so, at what premium rate per $1000 (for this assignment, just for a Female non-smoker at issue age 50). You will do this by comparing the risks of selling a Level Premium Term product with the risks of selling the YRT design.
You must submit a report discussing your sensitivity and scenario tests performed on the key risks incurred in selling these policies. In particular, since the actuaries at Storrs Life are already familiar with the YRT product, but your company has never sold a level premium term design, you must point out all significant differences in the key risks of these two products, as determined by your testing. Of course, you must also explain, as best as you are able, what is causing these differences. You should also discuss the risks that are the same or similar between the two products and describe these risks.
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