Analytics for Insurance

Chapter 9Life and Pensions

Life insurance, sometime known as life ‘assurance’ is a form of insurance which makes payment upon death, terminal illness or critical injury on the part of the policyholder. Upon the ‘event’ happening the insurer makes a payment usually by way of a lump sum. Where death appears suspicious in nature or there is insurance for a particularly large sum, insurers may want more than the death certificate and also want to look into the circumstances more carefully.

Endowment insurance is similar in nature to life insurance, other than that the policy is not ‘triggered’ by death but rather by the expiry of a defined period of time. In the UK, many house purchase mortgage arrangements are based on repayment of the interest on the loan only, with the capital being repaid at the end of the loan period as a lump sum underpinned by an endowment insurance.

The life insurance industry is complex with many parts to consider. The intention of the insurer is to predict the lifespan of the individual using actuarial sciences based on location, lifestyle and other factors, and then set a premium which adequately takes into account the eventual outgoings and administrative expenses.

Group Life Insurance is where a policy is taken out for a group of people, perhaps employees or members of a trade union or cooperative. In this situation the underwriter is unable to consider the individual but rather needs to deal with the group as a whole, usually taking into account the ...