CALCULATION OF UNIT-LINKED INSURANCE PREMIUM

• Main Author: Grace Theophilia Hans, Josephine
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/54944
• Institution: Institut Teknologi Bandung

There are all kinds of financial risks and insurance can minimize the financial risks. Traditional life insurance only provides protection such as sum insured. However, the sum insured will be more worthless in the future because of inflation. Therefore, Unit-Link Insurance Plan (ULIP) is needed because this insurance provides protection and investment. The benefits provided will depend on the value of the invested assets. The high return of the benefits have a high risk as well. In ULIP there are two kinds of risks we are concerned about, mortality risk and financial market risk. These two behavior will be modeled separately, the financial component using binomial lattice model or Cox, Ross, Robinson (CRR) model and the insurance component using mortality table. The purpose of this paper are to present a simple pricing method to determine annual net premium of ULIP and a method for comparing traditional life insurance with ULIP. A simulation of annual net premium calculation will be performed for term life insurance ULIP product of 5 years.