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A Study on the Guarantee Costs and the Profitability Analysis of Whole Life Insurance by Different Guarantee Type according to Introduction of IFRS17
Journal of Insurance and Finance
2017, 28(3),
pp.25-52
DOI :10.23842/jif.2017.28.3.002
Publisher : Korea Insurance Research Institute
Research Area : Business Management
DOI :10.23842/jif.2017.28.3.002
Publisher : Korea Insurance Research Institute
Research Area : Business Management
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The costs of GMIR and GMSB are not properly recognized in the perspective of both current pricing and current reserve provision. Under IFRS17, the burden of O&G will be valued using risk neutral scenario. In the perspective of IFRS17, this paper calculates the costs of GMIR, GMSB, and GMDB for whole life insurance products by different guarantee type. This paper also performs the profit test under IFRS17 and MCEV principle. When GMIR is higher, the cost of GMIR (PR-GMIR) increases, while the cost of GMSB (PR-GMSB) and the cost of GMDB (PR-GMDB) decrease. However, the total cost of insurer (T-GMSB) increases. When pricing interest rate is higher, PR-GMIR changes slightly, but PR-GMSB increases significantly. The profit of GMSB product without guarantee fee is lowest compared with other guarantee type products due to the consideration of O&G burden. The profit of the dynamic lapse rate model is lower than that of deterministic lapse model.
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