(10 points)CTI is a life insurance company that plans to issue a new, high volume, low sum...
Question:
(10 points)CTI is a life insurance company that plans to issue a new, high volume, low sum insured term insurance policy through direct marketing.Its current business is predominantly traditionally-brokered term insurance.
CTI assumes the following for calculating premiums and reserves.
(i) For brokered policies, mortality follows the Standard Ultimate Life Table, and expenses are 8% of each premium.
(ii) For direct-marketed policies, mortality follows the Standard Ultimate Life Table with a 5-year addition to the policyholder's age.Expenses are 3% of each premium.
(iii) i = 0.05
(iv) Premiums are calculated using the equivalence principle.
(2 points)CTI would like to offer a revised, direct-marketed 10-year term policy,where the annual premium in the first five years is of the annual premium in the last five years.
Show that the initial annual premium for a 50,000 policy issued to (40) is 40 to the nearest 10.You should calculate the value to the nearest 0.01.