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Effect of Select Mortality Tables on Life Insurance Liability Valuation

Abstract

The study examines the effect of select mortality tables on life insurance liability valuation, focusing on how mortality assumptions that reflect differences in policyholder experience at different durations after policy entry influence the estimation of future insurance liabilities. Select mortality tables provide mortality rates based on both age and duration since entry into an insurance contract. Their application can therefore provide a more detailed basis for estimating the expected timing of future claims and the financial obligations of life insurers. The study will investigate how the use of select mortality tables affects the valuation of life insurance liabilities. It will assess differences in liability estimates obtained under select mortality assumptions and examine how mortality variations during the early durations of a policy influence actuarial present values. The study will also consider how the duration of policy exposure affects the estimated probability of death and the resulting liability obligations. The analysis will focus on select mortality rates, life insurance liabilities, policy duration, mortality probabilities, survival probabilities, actuarial present values, and expected death benefits. Actuarial valuation techniques will be applied to estimate liabilities using selected mortality assumptions. Comparative and sensitivity analyses will be used to examine how variations in select mortality rates affect calculated liability values. A quantitative research approach will be adopted for the study. Relevant mortality and life insurance policy data will be analysed using select mortality tables and standard actuarial valuation models. Liability values will be calculated across different policy durations and mortality assumptions, while comparative analysis will be used to assess differences in estimated obligations. Sensitivity analysis will also be applied to determine the effect of changes in select mortality rates on liability estimates. The study is expected to reveal that select mortality tables have a measurable effect on life insurance liability valuation. Differences in mortality rates during the early years of policy coverage may produce variations in estimated liabilities because they affect the expected timing and probability of future death benefits. The magnitude of these differences is expected to depend on policy duration, age at entry, mortality experience, and the structure of the insurance contract. The findings are expected to provide useful information for actuaries and life insurance companies in selecting appropriate mortality assumptions for liability valuation. The study may support more accurate estimation of future claims obligations and improve the reliability of actuarial reserves and financial planning. It may also demonstrate the importance of considering policy duration when applying mortality assumptions to life insurance valuation. The study concludes that select mortality tables are an important consideration in the valuation of life insurance liabilities. It is therefore recommended that actuaries assess relevant mortality experience and apply suitable select mortality assumptions when estimating life insurance obligations to ensure that liability values appropriately reflect the expected mortality experience of policyholders.

Keywords: Select mortality tables, life insurance liabilities, liability valuation, select mortality rates, mortality assumptions, policy duration, mortality probabilities, survival probabilities, actuarial present value, life insurance valuation, death benefits, actuarial reserves, mortality experience, actuarial modelling, insurance liabilities.