Life Insurance Mathematics: tutorial week 6

Academic Year 2022-2023

Please consult the exercises available on Canvas. The set of Chapter 7 exercises (and solutions)
from the second edition of the DHW book are available in pdf format. We focus particularly on
the following problems:

exercise 7.8 in 3rd edition DHW; i.e. exercise 7.1 in 2nd edition DHW

exercise 7.1 in 3rd edition DHW; i.e. exercise 7.2 in 2nd edition DHW

exercise 7.9 in 3rd edition DHW; i.e. exercise 7.3 in 2nd edition DHW (only (a)-(e) to be
studied)

exercise 7.20 in 3rd edition DHW; i.e. exercise 7.6 in 2nd edition DHW.

Extra Old midterm question. For a special, fully discrete life insurance on (40) we have:
• death benefit is 20 euro in the first year, and 10 euro in the next years
• i = 0.03
• q40 = 0.002
• A40 = 0.37
• A50 = 0.48.
Determine the policy value at the end of year 10.

Extra Old exam question. For a special fully discrete 3-year term insurance with level premiums on
(x), you are given:
• the death benefits, bk+1 for death between t = k and t = k + 1, and mortality rates are

k bk+1 qx+k
0 100 000 0.03
1 200 000 0.05
2 300 000 0.07

• i = 0.06.
Calculate the net premium reserve at the end of the first policy year.

Extra Exam 2021 question. You are the actuary for a life insurance company that has sold 1 000
identical and independent fully discrete 20-year term policies to individuals age 40. The death
benefit for each policy is 500 000 EUR and the gross annual premium for each policy, computed
using the equivalence principle, is 43 287 EUR. The policy value basis for the product is:

1
 • mortality: qx = 0.002 · x for 40 ≤ x ≤ 59
• interest is 5%
• issue expenses: 1 000 EUR per policy (year 1)
• maintenance expense: 100 EUR per policy in force (year 2 and following)
• claims expense: 300 EUR per death.
Issue and maintenance expenses are incurred at the beginning of the policy year; claims expenses
are incurred at time of death benefit payments. Calculate 1 V g and 2 V g .