A unit linked endowment product for sports men and women upon diagnosis of critical illness, disability and death.

Abstract

The entire project was based on an objective to design a unit linked insurance product that pays sports men and women on death, critical illness and disability that is profitable (3% and above profit margin) to an insurer and gives an attractive sum assured to the insured. Profit testing technique was used as various actuarial computations were carried out to determine the profit margin for different ages. The key assumptions made include; Interest rate, management charges, unit growth rate, bid/offer spread, allocation rate, Kenyan mortality Expenses, Risk Discount rate and Surrender rates. The profit testing technique helped to determine the profitability of the product. From the above, a profit testing technique was adapted in doing actuarial calculation both in MS excel and Python to yield profit margins of sports persons at a particular given age and projected profit margin projected fund values that maybe realized by the insurance carrier if they were to sell this product. From the results of the profit test, the product is observed to be more profitable with younger sports personalities from around 20 years to around 34 years are more profitable with males for the other ages. . The results of the sensitivity analysis show that a slight change in inflation rate and expenses greatly affects the profitability of this product thus are the most sensitive assumptions. In conclusion, the product is profitable across all eligible ages. However, two assumptions namely inflation rate and expense rate should be monitored frequently because they are so sensitive to profitability upon small changes. A recommendation from me is that consideration should be made for a blended sport technology and unit linked insurance so as to balance their effect on profitability and long term marketability and aggressive research in this venture would encourage different sports to venture in the product.