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Comparative Analysis of Mortality Assumptions in Life Insurance Valuation

Abstract

The study examines the comparative analysis of mortality assumptions in life insurance valuation, focusing on how different assumptions about mortality rates influence the estimation of insurance liabilities, premiums, and policy values. Mortality assumptions are fundamental components of actuarial valuation because they determine the expected timing and probability of death among insured individuals. The accuracy and appropriateness of these assumptions are therefore important for maintaining adequate reserves, ensuring fair premium determination, and supporting the financial sustainability of life insurance products. The study will investigate differences among mortality assumptions used in life insurance valuation and assess their implications for actuarial calculations. It will focus on variations in mortality rates, mortality improvement patterns, age-specific death probabilities, life expectancy, and assumptions concerning future mortality experience. The study will also examine how changes in these assumptions may influence the projected cash flows and financial obligations associated with life insurance policies. Particular attention will be given to the use of different mortality tables and actuarial assumptions in estimating expected claims and policy liabilities. Actuarial valuation techniques will be applied to compare the financial outcomes produced under alternative mortality assumptions. Factors such as policy duration, age at entry, benefit structure, mortality improvement, and expected survival patterns will be considered in determining how sensitive life insurance valuations are to changes in mortality assumptions. A quantitative research approach will be adopted for the study. Relevant mortality data, life tables, insurance policy information, and actuarial assumptions will be examined using actuarial valuation techniques and comparative statistical analysis. Present value calculations, mortality probabilities, life expectancy measures, and sensitivity analysis will be employed to evaluate differences in estimated premiums, reserves, and policy liabilities under alternative mortality assumptions. The study is expected to reveal that variations in mortality assumptions can produce significant differences in life insurance valuation outcomes. More conservative mortality assumptions may result in higher estimated liabilities and premiums, while assumptions reflecting lower mortality rates or greater longevity may produce different patterns of expected claims and longer-duration liabilities. The magnitude of these differences is expected to vary according to policy characteristics, age distribution, and the duration of insurance contracts. The findings are expected to have important implications for life insurance pricing, reserving, financial reporting, and risk management. A better understanding of the effects of alternative mortality assumptions may assist actuaries and insurers in selecting assumptions that appropriately reflect observed mortality experience and anticipated future trends. The study may also support more effective monitoring of assumption changes and improve the assessment of the financial sensitivity of life insurance portfolios. The study concludes that appropriate mortality assumptions are essential for reliable and sustainable life insurance valuation. Differences in mortality assumptions can materially affect premiums, reserves, expected claims, and policy liabilities, making careful assumption selection an important actuarial responsibility. It is therefore recommended that insurers regularly review mortality experience, update mortality assumptions when necessary, and apply suitable actuarial valuation techniques to ensure that life insurance liabilities remain adequately and realistically assessed.

Keywords: Mortality Assumptions, Life Insurance, Insurance Valuation, Mortality Rates, Mortality Tables, Actuarial Valuation, Life Insurance Premiums, Insurance Reserves, Policy Liabilities, Life Expectancy, Mortality Improvement, Expected Claims, Present Value, Actuarial Risk, Life Insurance Pricing.