| dc.description.abstract | The main objective of this project was to design and price a term assurance product that pays out either a death benefit in case of death of the insured or a disability benefit in case of total permanent disability of the insured. The minimum term for the product was 5 years and maximum 20 years with the maximum age at which a product can expire being 75 years.
The key assumptions made in this project have been; The radix of 1,000,000, the interest rate of 6.0%, Risk discount rate of 15% per year, a withdraw rate of 12% per policy year excluding the first and last years, a one-time commission of 40%, and initial, renewal and claims expenses of 20%, 10% and 3% respectively.
The project involved manipulation of secondary data using the profit testing approach to price modelling, using assumptions from various sources for example; Uganda’s disability statistics from Uganda Bureau of Statistics abstract and risk discount and interest rates from Bank of Uganda treasury bonds rates.
From the model, for example, a 20-year-old male who pays a premium of Ugx. 600,000 a year for a term of 5 years would get Ugx. 3,826,441.59 in case of his death or Ugx. 3,826,441.59 in case he is total and permanently disabled while the insurance company would earn a profit of 7.9%.
Analysis of the model shows that it is most sensitive to the expenses incurred more so the renewal expenses. It would therefore be productive to vary the commission and expenses to make sure sales are encouraged but at the same time sales agents are properly compensated. | en_US |
