Question

Which equation represents the determination of price in insurance using the formula method?

a.

Present Value of Premiums (Receipts) = Present Value of Benefits (Outgo) + Present Value of Expenses (Outgo)

b.

Premium = Sum assured + Expense incurred in year t

c.

Present Value of Ps = Present Value of S + Present Value of E(t)s

d.

Premium = Sum assured - Expense incurred in year t

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (a).Present Value of Premiums (Receipts) = Present Value of Benefits (Outgo) + Present Value of Expenses (Outgo) Explanation:In the formula method of determining price in insurance, the fundamental principle is represented by the equation of value: Present Value of Premiums (Receipts) = Present Value of Benefits (Outgo) + Present Value of Expenses (Outgo). This equation reflects the balance between premiums received, benefits paid out, and expenses incurred.

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Q. Which equation represents the determination of price in insurance using the formula method?
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