A model to design and price a micro insurance life product with medical cover.
Arotu Tayal, Emmanuel
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The main objective of this project was to design a product that provides a benefit on death of the policyholder within the specified term as well as medical cover to the policyholder provided, he / she is alive within the term of the policy. The profit testing technique was adopted in the design of the model for the calculation of premiums and reserves. The assumptions taken were interest rate of 9%, risk discount rate of 8%, expenses of 40% of premium, commission of 40% of premium, management charge of 1% of premium and mortality based on KE 2007-2010 life tables. These assumptions were quoted from various sources which include the Annual Insurance Market Report 2020 published by the Insurance Regulatory Authority and Bank of Uganda | T Bonds Auction and Yield Curve for the Bank of Uganda official website. From the results obtained from the model, it was observed that product is profitable for both males and females across all terms between age 20 and age 60. The overall profit margin of males is higher than that of females for each term. The profitability of the product reduces slightly as the terms increase from 5 to 10 years. At age 65, the product is not profitable for terms less than 8 years. A sensitivity analysis was done, and it indicated that the product is resilient to changes in economic factors. Therefore, it is recommended that the product should be sold to individuals aged 20 to 60, both male and female across all terms. In the event of significant changes in the assumptions, the product should be redesigned.