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Effect of Mortality Select Periods on Life Insurance Premium Values

Abstract

Mortality select periods refer to the period during which mortality rates are adjusted to reflect the different mortality experience of newly insured individuals compared with those who have been insured for a longer period. Select mortality assumptions are important in life insurance actuarial valuation because the mortality experience of policyholders may differ according to the time elapsed since policy entry. Changes in the select period can therefore influence survival probabilities, expected claims, and the value of life insurance premiums. This study will examine the effect of mortality select periods on life insurance premium values. It will assess how variations in the length of the mortality select period influence the actuarial value of life insurance premiums. The study will also compare premium values under different select period assumptions and determine how changes in mortality assumptions during the select period affect the estimated cost of life insurance benefits. The study will focus on mortality select periods, life insurance premium values, select mortality rates, ultimate mortality rates, survival probabilities, life insurance benefits, actuarial present values, policy entry age, mortality assumptions, premium determination, mortality tables, and life insurance valuation. Relevant mortality and life insurance data will be analysed to determine how different select period assumptions affect expected mortality experience and the corresponding premium values. A quantitative research approach will be adopted for the study. Data relating to policyholder ages, entry ages, mortality rates, select periods, policy terms, benefit amounts, premium payment patterns, and discount rates will be analysed. Actuarial present value calculations, select-and-ultimate mortality table techniques, life table analysis, descriptive statistics, comparative analysis, and sensitivity analysis will be used to evaluate premium values under alternative mortality select period assumptions. The study is expected to reveal that mortality select periods may have a significant effect on life insurance premium values. Shorter or longer select periods may produce different survival probabilities and expected claim costs, resulting in variations in the actuarial value of premiums. The magnitude of the effect may depend on policyholder entry age, policy duration, mortality differentials between select and ultimate periods, benefit amounts, interest rates, and the structure of the mortality table. The study will be useful to actuaries, life insurance companies, underwriters, pricing analysts, pension and insurance administrators, regulators, and researchers. It may provide useful information for improving mortality assumptions, strengthening life insurance premium determination, assessing policyholder risk, and supporting accurate actuarial valuation. The findings may also assist insurers in understanding the financial implications of using different mortality select periods in premium calculations. The study concludes that mortality select periods are important considerations in life insurance premium valuation because differences between select and ultimate mortality experience can influence expected claims and actuarial premium values. It is therefore recommended that life insurers regularly review mortality experience and apply appropriate select period assumptions to support accurate premium determination and sustainable life insurance pricing.

Keywords: Mortality select periods, life insurance premium values, select mortality rates, ultimate mortality rates, survival probabilities, life insurance premiums, actuarial valuation, mortality tables, policy entry age, mortality assumptions, expected claims, actuarial present value, life insurance benefits, premium determination, life insurance pricing.