QUESTION: Create INSURANCE

[htyen1]

Hi,

I am trying to understand how Insurance companies figure their insurance policy?

meaning how does an insurance comes decide a person who is 30 yrs old for example at a specific condition need to pay X for their policy?

Any sort of direction or guidence will be greatly appreciated.

thx

[Take 2]

That's a pretty broad question -- details are pretty complicated.

Using a profit goal (often measured as a return on investment -- ROI), the actuary calculates rates based upon the expected mortality, lapses, expenses, and investment income for a block of policyholders.

[urysohn]

Very roughly...
- Set assumptions (mortality, lapse, expense, commission, product features, reserves,..........)
- Project cash flows
- Measure profitability

There are numerous profit measures, all (?) of which are based on the cash flows but which tell you something slightly different. You probably don't want to use just one.

If you want to actually do this in practice, I suggest calling a consulting firm to do it for you (based on your current level of understanding).