Evaluation of Time to Termination of Life Insurance Contracts with Benefits Calculations

Abstract

In life insurance industry, the available benefits are keys to convince people to purchase the life insurance products. However, in developing countries, the people do not purchase life insurance products because they are not attractive to them. The purpose of this paper was to evaluate time to termination of life insurance contracts with benefits calculations. The objectives were specifically to: evaluate time to stop paying premiums payments by estimating survival function using Kaplan Meier estimator, model the dependency of the survival time to the risk factors of age, gender and marital status using Cox proportional hazard regression model, calculate premiums and reserves for the life insurance contracts using equivalence principle and calculate surrender values and paid up sum assured when the policyholder stops paying premium payments. From the results, the survival probability of life insurance contract in the beginning of a contract is higher compare to survival probability of it in the last period of a contract which means that age influenced significantly the survival time. The whole life insurance contract is cheaper compare to endowment assurance and pure endowment contracts because its premiums, reserves and benefits are down compare to other types of life insurance contracts. Therefore, we recommended to use survival analysis tool because it helps to take decisions with strong facts especially for time to an event analysis and to compute adequately premiums and reserves for getting the available benefits to an event which are accurate. We have also shown the room for further studies.