Department of Finance
Date of this Version
1994
Document Type
Article
Citation
Journal of Actuarial Practice 2 (1994), pp. 221-236
Abstract
For ordinary life policyholders who want to pay more frequently than annually, insurers construct schedules of modal premium factors that reflect additional charges for the costs of collection, forgone interest, and premiums uncollected or refunded in the year of death. Competition within the industry forces convergence of such schedules. On the other hand, if such factors for a given company reflect its own experience (in expense, interest, mortality, and persistency), the differences between companies will force schedules apart. Analysis of a large group of life insurers over the 1972-1982-1992 period shows that modal premium factors are dustered closely, that they are becoming more dispersed over time, and that the mean factors are increasing as a percentage of premiums. These findings are consistent with the viewpoint that modal premium factors are beginning to reflect individual company experience and that the companies increasingly are able to cover the additional costs of business written on other than an annual basis.
Included in
Accounting Commons, Business Administration, Management, and Operations Commons, Corporate Finance Commons, Finance and Financial Management Commons, Insurance Commons, Management Sciences and Quantitative Methods Commons
Comments
Copyright 1994 Absalom Press