Question

How is the net present value (NPV) expressed in terms of the premium income of insurance companies?

a.

As a percentage of the premium income

b.

As the total sum of premium income

c.

As a fraction of the premium income

d.

As the difference between premium income and expenses

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (a).As a percentage of the premium income Explanation:The net present value (NPV) can be expressed as a percentage of the present value of the premiums that will be paid under the policy. This measure, known as profit margin, relates the profitability of the policy to the size of the market, which is often measured in terms of premium income.

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Q. How is the net present value (NPV) expressed in terms of the premium income of insurance companies?
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