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Effect of Insurance Product Discontinuation on Existing Policy Liabilities

Abstract

Insurance product discontinuation occurs when an insurer stops offering a particular insurance product to new policyholders while continuing to honour obligations arising from existing contracts. Although new policies may no longer be issued, existing policies can continue to generate premiums, claims, benefits, expenses, and other contractual cash flows until their maturity or termination. The discontinuation of a product may therefore influence the composition, development, and projection of liabilities associated with the remaining policies. This study will examine the effect of insurance product discontinuation on existing policy liabilities. It will assess how the withdrawal of a product from new business affects the estimation and development of liabilities arising from policies already in force. The study will also examine changes in expected claims, benefit payments, premium inflows, expenses, and other contractual obligations following product discontinuation. The study will focus on insurance product discontinuation, existing policy liabilities, actuarial valuation, policy run-off, claims experience, policy persistency, premium income, benefit payments, policy duration, reserve estimation, and liability projections. Actuarial techniques will be used to evaluate the future obligations associated with discontinued products. The study will also consider how changes in portfolio size, policyholder behaviour, mortality or claims experience, and remaining contract duration influence liability estimates. A quantitative research approach will be adopted for the study. Historical insurance policy, premium, claims, benefit, expense, and reserve data will be analysed using descriptive statistics, actuarial liability models, cash flow projection techniques, run-off analysis, comparative analysis, and sensitivity analysis. Liability projections before and after product discontinuation will be examined to determine how changes in portfolio development influence existing policy obligations. The study is expected to reveal that insurance product discontinuation may have a significant effect on existing policy liabilities. The gradual run-off of discontinued products may alter the number and characteristics of policies remaining in force, resulting in changes in projected claims, benefit payments, premium income, and expenses. The magnitude of the effect may depend on the size and maturity of the portfolio, policy persistency, claims experience, benefit structures, remaining policy terms, and actuarial assumptions. The study will be useful to actuaries, insurance companies, valuation analysts, financial managers, risk managers, regulators, underwriters, and researchers. It may provide useful information for managing discontinued insurance products, improving liability projections, assessing reserve requirements, forecasting future cash flows, and supporting financial planning for existing policy obligations. The findings may also assist insurers in monitoring the financial consequences of withdrawing products from new business. The study concludes that insurance product discontinuation is an important consideration in the management and valuation of existing policy liabilities because the resulting run-off portfolio can change the pattern and magnitude of future contractual obligations. It is therefore recommended that insurers and actuaries regularly review discontinued product portfolios, update actuarial assumptions based on emerging experience, and apply appropriate liability projection techniques to support accurate valuation of existing policy obligations.

Keywords: Insurance product discontinuation, existing policy liabilities, actuarial valuation, product withdrawal, policy run-off, insurance reserves, claims experience, policy persistency, premium income, benefit payments, policy duration, liability projections, actuarial assumptions, cash flow forecasting, insurance liability management.