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Modelling Endowment Insurance Values Using Mortality and Interest Rate Assumptions

Abstract

The study examines the modelling of endowment insurance values using mortality and interest rate assumptions. Endowment insurance provides financial protection through death benefits while also providing a maturity benefit when the policyholder survives to the end of the policy term. The actuarial value of an endowment policy depends significantly on the probability of death or survival and the rate used to discount future benefit payments. Accurate modelling of these assumptions is therefore important for determining reliable insurance values and assessing future policy liabilities. The study will develop an actuarial model for estimating endowment insurance values under different mortality and interest rate assumptions. It will examine how changes in mortality rates and interest rates influence the present value of death and maturity benefits. The study will also evaluate variations in policy values across different policy durations and benefit structures to determine how the assumptions affect the estimated financial value of endowment insurance contracts. The modelling process will incorporate mortality probabilities, survival probabilities, interest rates, policy duration, benefit amounts, and the timing of benefit payments. Life tables will be used to obtain appropriate mortality and survival estimates, while discounting techniques will be applied to determine the present value of future benefits. Alternative mortality and interest rate scenarios will be considered to assess the sensitivity of endowment insurance values to changes in the underlying actuarial assumptions. A quantitative research approach will be adopted for the study. Hypothetical or secondary mortality and insurance data will be used to construct representative endowment policy scenarios. Actuarial present value techniques, life table methods, probability calculations, discounting procedures, and mathematical modelling will be applied to estimate policy values under alternative mortality and interest rate assumptions. Comparative and sensitivity analyses will then be used to examine changes in the resulting endowment insurance values. The study is expected to reveal that mortality and interest rate assumptions have substantial effects on the estimated values of endowment insurance policies. Higher mortality rates are expected to increase the expected present value of death benefits, while changes in survival probabilities may affect the expected value of maturity benefits. Changes in interest rates are also expected to influence the discounted value of future benefits, with higher discount rates generally reducing their present values. The study will provide useful information for actuaries, life insurance companies, regulators, and researchers by demonstrating how actuarial assumptions can influence the valuation of endowment insurance contracts. The findings may assist insurers in assessing policy values, determining appropriate premiums and reserves, evaluating financial obligations, and conducting sensitivity analysis under changing economic and demographic conditions. The study may also contribute to improved understanding of actuarial modelling techniques among students and practitioners of actuarial science. The study concludes that mortality and interest rate assumptions are fundamental components of endowment insurance valuation because changes in these assumptions can significantly influence the present value of future policy benefits. It is therefore recommended that insurers use appropriate mortality data, realistic interest rate assumptions, and sound actuarial modelling techniques when valuing endowment contracts. Regular review and sensitivity testing of these assumptions should also be undertaken to support reliable valuation and effective management of life insurance liabilities.

Keywords: Endowment insurance, actuarial modelling, insurance valuation, mortality assumptions, interest rate assumptions, mortality rates, survival probabilities, actuarial present value, death benefits, maturity benefits, policy duration, discounting, life tables, insurance liabilities, actuarial valuation.