how can the survival function models be used in defending the risk and life assurance products.
how can the survival function models be used in defending the risk and life assurance products.
Homework Answers
The survival function models give out the probabilities of people surviving after a certain time has elapsed out of the total population that was there at the start of the period of observation. Basis these probabilities, the life insurance payout to be paid by the insurance companies is estimated and this forms the basis for the calculation of the insurance premium by the policyholders.
The whole business model of the insurance firm is based on the fact that the premium accumulated should exceed the exceeded payout as calculated based on the survival models and hence if this is the case, then the insurance firms get a return on the protection provided by them. Thus the survival models form the backbone of the business model for the life insurance firms and hence they can be used to define the various products issued by life assurance companies.
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how can the survival function models be used in defending the risk and life assurance products.
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