Life Insurance Simulation in R
Document Type
Oral Presentation
Campus where you would like to present
Ellensburg
Event Website
https://digitalcommons.cwu.edu/source
Start Date
16-5-2019
End Date
16-5-2019
Abstract
Today’s life insurance companies are highly regulated on the state level and they must adhere to strict mathematic formulation. All their financial products are also reviewed by states regulators. Under such constraints, our project aims to simulate if the insurance companies are still profitable under these strict regulations. For this purpose, we used the R language code to calculate the net simple premium of whole life insurance based on mortality data from the Society of Actuaries database. Then, we simulate the profit result with 10000 life insurance policies (clients) for about 100 years, where the ages of the insured and the benefit payment are randomly created from a uniform distribution and the random death ages of the insured are created based on mortality tables. We utilize 2D and 3D plots to visualize the result more intuitively. Moreover, to improve the speed of the R code, we embedded C code within R, which made the simulation significantly faster. Our simulation results show that if the beneficial interest and the investment interest are the same, then the final profit of the insurance companies varies between positive and negative values, so to always maintain a positive profit, the insurance companies should invest the collected premiums with slightly higher interest than the beneficial interest.
Recommended Citation
Lin, Chao Huang; Yepdjio, Hermann; and Alzamil, Lubna, "Life Insurance Simulation in R" (2019). Symposium Of University Research and Creative Expression (SOURCE). 113.
https://digitalcommons.cwu.edu/source/2019/Oralpres/113
Department/Program
Computer Science
Slides for SOURCE 2019 presentation Yepdjio
Surface3DProfitValues.html (3924 kB)
Surface 3D Profit Values
Additional Files
Slides.pdf (864 kB)Slides for SOURCE 2019 presentation Yepdjio
Surface3DProfitValues.html (3924 kB)
Surface 3D Profit Values
Life Insurance Simulation in R
Ellensburg
Today’s life insurance companies are highly regulated on the state level and they must adhere to strict mathematic formulation. All their financial products are also reviewed by states regulators. Under such constraints, our project aims to simulate if the insurance companies are still profitable under these strict regulations. For this purpose, we used the R language code to calculate the net simple premium of whole life insurance based on mortality data from the Society of Actuaries database. Then, we simulate the profit result with 10000 life insurance policies (clients) for about 100 years, where the ages of the insured and the benefit payment are randomly created from a uniform distribution and the random death ages of the insured are created based on mortality tables. We utilize 2D and 3D plots to visualize the result more intuitively. Moreover, to improve the speed of the R code, we embedded C code within R, which made the simulation significantly faster. Our simulation results show that if the beneficial interest and the investment interest are the same, then the final profit of the insurance companies varies between positive and negative values, so to always maintain a positive profit, the insurance companies should invest the collected premiums with slightly higher interest than the beneficial interest.
https://digitalcommons.cwu.edu/source/2019/Oralpres/113
Faculty Mentor(s)
Donald Davendra