A pricing and profit testing model for, a unit-linked endowment insurance plan for fishermen

Abstract

The main objective of this project was to develop a pricing and profit testing model for a unit linked insurance plan tailored for fishermen that would pay out money if a fisherman becomes permanently disabled, dies, decides to stop the plan early, or lives until the plan ends. It also helps them save and invest their money for the future. other objectives were to come up with a profitable product and designing a python program that automates the pricing and profit testing for various ages and policy terms. The model has three decrements of death, permanent disability and surrender. Microsoft excel was first used to develop the pricing and profit testing model for a 20-year-old male and female life for a six-year term. The procedure was the transferred to python 3.13.3 thus coming up with a menu driven program that performs the pricing and profit testing for various ages and policy terms. The Kenyan mortality and disability tables and several assumptions and formulae were used to develop the model. The principle of equivalence and goal seek function in excel was used to come up with the exact premiums. Sensitivity analysis was then done on some assumptions for example the interest rate, inflation rate to examine the effect of the changes in the assumptions on the premiums and profit margins of the model. The results show that for a 20-year-old male life buying a 6-year plan with 9 million Ugandan shillings of coverage, the yearly payment will be Ugx 1009432.108 while for a female it is Ugx 1008166.678. The plan's profit margins (how much money the insurance company would make) varied, generally between about 3% and 14%, depending on the policy length and the person's age and gender. Premiums were noticed to be lower for longer plans but higher for older people. On the other hand, profits were usually better for longer plans but lower for older people. Sensitivity analysis also showed that how much the plan costs to set up (initial expenses) had the biggest effect on profits, while changes in death rates had the biggest effect on the premiums. This special insurance plan can really help Ugandan fishermen become more financially secure. It gives them both protection against risks and a way to build wealth. This approach could be used for other similar communities and help more people in Uganda get access to insurance