A pricing and profit testing model for a unit-linked tenant protection endowment plan.

Abstract

Uganda’s growing urban population depends heavily on rental housing, yet no existing insurance product protects tenants against the loss of rental income following the death or permanent total disability of a breadwinner. This project designs and evaluates a unit-linked tenant protection endowment insurance product intended to give renting families in Kampala continued rental cover for a period of two years, while also building long-term savings. The main objective was to develop a product that pays a rent-related benefit on death, permanent total disability, surrender or survival to the end of a 10-year policy term, and to assess whether such a product could be priced affordably for renters while remaining profitable for insurers. A pricing and profit-testing model was built in Microsoft Excel for a 30 – year old male and female, using a sum assured of UGX 16,800,000, equivalent to roughly two years of rent at the assumed monthly rent of UGX 700,000, and the model built in Python 3.14 to extend the analysis across a range of ages and policy terms. Assumptions on mortality, disability, expenses, interest rates and surrender were drawn from a combination of Kenyan and Ugandan data, in the absence of published Uganda-specific experience tables. For the base case of a healthy 30 – year old male, the model produced an annual premium of UGX 641,711 and a profit margin of 6.25%. Female results, presented in the appendix, showed a slightly lower annual premium of UGX 629,470 and a higher profit margin of 7.48%. Sensitivity analysis showed the profit margin to be most responsive to changes in inflation, expenses, interest rate and the bid/offer spread, and less responsive to mortality. The results suggest that a unit-linked tenant protection product is feasible for the Ugandan market, though its profitability varies considerably by age and policy term and would require careful pricing and monitoring by insurers.