A model to design and price a unit linked “entandikwa plan” life product for students in tertiary institutions
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The main objective of this project was to design a unit-linked product that provides a benefit on the death of the policyholder within the specified term as well as offer a medium from where the policyholder can save money in their early years of adulthood as they progress with their tertiary education. The profit testing technique was adopted in the design of the model for the calculation of premiums. The assumptions taken were an interest rate of 15%, a risk discount rate of 9%, expenses of 25% of the premium, a commission of 40% of the premium, a management charge of 1% of the premium, and mortality based on Uganda Task Mortality 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 the product is profitable for both males and females across all terms between age 20 and age 30. 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. A sensitivity analysis was done, and it indicated that the product is resilient to changes in economic factors Therefore, it was recommended that the product should be sold to individuals aged 20 to 30, both male and female across all terms. In the event of significant changes in the assumptions, the product should be redesigned.