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Effect of Mortality Assumptions on Whole Life Assurance Values

Abstract

Whole life assurance provides financial protection by paying a benefit upon the death of the insured, making accurate valuation essential for determining premiums and measuring future insurance obligations. Mortality assumptions are fundamental to whole life assurance valuation because they determine the probabilities of death and survival at different ages. The accuracy of these assumptions can therefore influence the estimated present value of future death benefits and the overall value of whole life assurance contracts. The study examines the effect of mortality assumptions on whole life assurance values. It will assess how variations in mortality rates and survival probabilities affect the actuarial value of whole life assurance benefits. The study will focus on age-specific mortality rates, survival probabilities, life expectancy, policy duration, and interest rate assumptions used in the valuation of whole life assurance contracts. The study will further model whole life assurance values under alternative mortality assumptions. Different mortality scenarios will be developed to examine how changes in mortality experience influence the expected timing of death benefits and their actuarial present values. Sensitivity analysis will also be conducted to determine the extent to which whole life assurance values respond to variations in mortality assumptions across different ages. A quantitative research approach will be adopted for the study. Relevant mortality and life table data will be obtained from appropriate actuarial and demographic sources and applied to selected whole life assurance valuation models. Actuarial present value calculations, life table techniques, descriptive statistics, comparative analysis, and sensitivity analysis will be employed to evaluate differences in whole life assurance values under alternative mortality assumptions. The study is expected to reveal that mortality assumptions have a significant effect on whole life assurance values. Higher mortality rates may result in earlier expected benefit payments and corresponding changes in actuarial values, while lower mortality rates may delay the expected payment of death benefits. The findings may also indicate that the effect of mortality assumptions varies across ages and becomes particularly important in long-term whole life assurance valuation. The study will provide useful information to actuaries, life insurance companies, pricing analysts, and insurance regulators involved in life assurance valuation. The findings may support the selection and regular review of appropriate mortality assumptions, improve the accuracy of whole life assurance valuations, and assist insurers in developing suitable premium and reserve estimates. The study may also contribute to better management of mortality risk within life assurance portfolios. The study concludes that mortality assumptions are a critical component of whole life assurance valuation because they influence the expected timing and present value of future death benefits. It is therefore recommended that insurers regularly review mortality assumptions using relevant mortality experience and apply appropriate actuarial techniques when valuing whole life assurance contracts. Accurate mortality assumptions may improve valuation reliability, premium determination, reserve estimation, and the financial management of whole life assurance products.

Keywords: Mortality assumptions, whole life assurance, assurance values, actuarial valuation, mortality rates, survival probabilities, life expectancy, actuarial present value, death benefits, life tables, mortality experience, interest rate assumptions, premium valuation, reserve estimation, mortality risk.