EOM 4 Exercise: about premimum

[merrycherub]

When calculating the profit, we only take one year sale for example, like sale of 2001, then project into 10 years..

We only collected premium at the beginning of the 1st year, why is there annual premium for each year projected? which was defined as:

Premium Collected equals Premium Sold multiplied by Cumulative Persistency at the Beginning of Year.

Thanks!

[Hugh Jass]

Originally Posted by merrycherub

When calculating the profit, we only take one year sale for example, like sale of 2001, then project into 10 years..

We only collected premium at the beginning of the 1st year, why is there annual premium for each year projected? which was defined as:

Premium Collected equals Premium Sold multiplied by Cumulative Persistency at the Beginning of Year.

Thanks!

IIRC, just put zeroes in for the years in which there is no premium.

[merrycherub]

Sorry, What does "IIRC" mean?


In the description of the spread sheet, it says:

"Premium Collected equals Premium Sold multiplied by Cumulative Persistency at the Beginning of Year"

and Cumulative Persistency was defined as:

"Cumulative persistency at the end of year equals cumulative persistency at the beginning of year, multiplied by 1 less the mortality rate, multiplied by 1 less the lapse rate. Cumulative persistency at the beginning of year 1 is 1.00000. Cumulative persistency at beginning of each year equals the cumulative persistency at the end of the prior year."

Because Cumulative Persistency was not ZERO for the following years after the 1st year, so the premiums are not ZERO for the remaining years..

Originally Posted by Hugh Jass

IIRC, just put zeroes in for the years in which there is no premium.

[Hugh Jass]

Originally Posted by merrycherub

Sorry, What does "IIRC" mean?


In the description of the spread sheet, it says:

"Premium Collected equals Premium Sold multiplied by Cumulative Persistency at the Beginning of Year"

and Cumulative Persistency was defined as:

"Cumulative persistency at the end of year equals cumulative persistency at the beginning of year, multiplied by 1 less the mortality rate, multiplied by 1 less the lapse rate. Cumulative persistency at the beginning of year 1 is 1.00000. Cumulative persistency at beginning of each year equals the cumulative persistency at the end of the prior year."

Because Cumulative Persistency was not ZERO for the following years after the 1st year, so the premiums are not ZERO for the remaining years..

IIRC= if I remember correctly. There's a thread in non-actuarial topics that features the most common abbreviations.
I wasn't saying make the persistency zero, just the premiums after year 1. Just because someone survived year 1 doesn't mean they pay additional premiums (especially if it's given to be a single premium policy.)

[ActuaryWannaB/SkiBum]

merrycherub,

I just finished this exercise and I didn't get any premiums of zero for any of the years. If you follow the steps provided in the spreadsheet you should be getting correct results. The premiums collected after the first year are the premiums paid for renewals from the original year. Good luck!

[2007Student]

I am just submitting this exercise as well...I agree that premiums should not be zero in any of the years.

I'd try this formula for band 1 and copy it down
=$F$23*L35

[merrycherub]

Thank you

I know how to follow the spread sheets and I am able to get the answer..

But just don't understand why there are premiums collected after 1st year..

"The premiums collected after the first year are the premiums paid for renewals from the original year"------ I read the assignment again, but couldn't found anything about renewal...

Could you please explain more about why premiums after 1st year are not zeros given that premium only paid at the beginning of the 1st year?

Originally Posted by ActuaryWannaB/SkiBum

merrycherub,

I just finished this exercise and I didn't get any premiums of zero for any of the years. If you follow the steps provided in the spreadsheet you should be getting correct results. The premiums collected after the first year are the premiums paid for renewals from the original year. Good luck!

[windriderlg]

I'd say that "simple term life insurance" implies level premium. So premium for each of years 2-10 equals the FY premium.