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Life Insurance Pricing

Discuss Life Insurance Pricing within the Taxation and financial services forums, part of the Upload / Download Banking and Insurance Projects and Notes category; Life Insurance Pricing: The pricing in case of life insurance is done on the basis of: Life Expectancy: In case ...

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Life Insurance Pricing
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Abhijeet S
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abhishreshthaa
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Life Insurance Pricing - September 25th, 2010

Life Insurance Pricing:

The pricing in case of life insurance is done on the basis of:

Life Expectancy:

In case of life insurance, the premium amount tends to be different for different customers. This differentiation is on the basis of age, medical history of a person.


1) Age

E.g.: Low premium is charged for children and youngsters as it is assumed that they are at a lesser risk of death as compared to the aged people.


2) Medical History

The medical history should be revealed to the insurance company by the customer in Utmost Good Faith i.e. the insured must provide to the insurer complete, correct and clear information of the subject matter of insurance.



E.g.: If in the medical history it is mentioned that the person has suffered from heart attack in the past or if he is suffering from any terminal disease like cancer or AIDS then, he is at a higher risk of death and hence higher premium is charged. However, if the insured doesn’t reveal that he is suffering from terminal disease or has suffered a heart attack previously and he dies due to the disease or heart attack then, the insurance company does not pay the claim for the same.



Case: The pricing of the policies in LIC (India) is done by the Actuarial Department, which is at the corporate level. The prices of the policies are fixed depending on the following conditions:


o Rate of return on investment in the present market scenario

o Life expectancy of the customer
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Jitendra Mazee
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Re: Life Insurance Pricing - February 25th, 2016

Quote:
Originally Posted by abhishreshthaa View Post
Life Insurance Pricing:

The pricing in case of life insurance is done on the basis of:

Life Expectancy:

In case of life insurance, the premium amount tends to be different for different customers. This differentiation is on the basis of age, medical history of a person.


1) Age

E.g.: Low premium is charged for children and youngsters as it is assumed that they are at a lesser risk of death as compared to the aged people.


2) Medical History

The medical history should be revealed to the insurance company by the customer in Utmost Good Faith i.e. the insured must provide to the insurer complete, correct and clear information of the subject matter of insurance.



E.g.: If in the medical history it is mentioned that the person has suffered from heart attack in the past or if he is suffering from any terminal disease like cancer or AIDS then, he is at a higher risk of death and hence higher premium is charged. However, if the insured doesn’t reveal that he is suffering from terminal disease or has suffered a heart attack previously and he dies due to the disease or heart attack then, the insurance company does not pay the claim for the same.



Case: The pricing of the policies in LIC (India) is done by the Actuarial Department, which is at the corporate level. The prices of the policies are fixed depending on the following conditions:


o Rate of return on investment in the present market scenario

o Life expectancy of the customer
Hey abhi, you did a superb job and your article explained the concept of life insurance pricing very well. I also found out some document on pricing of life insurance and would like to share it with you. So please download and check it.
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File Type: pdf Life Insurance Pricing.pdf (896.4 KB, 0 views)
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