L-42- Valuation Basis (Life Insurance)
A chapter on Valuation basis covering the following minimum criteria should also be displayed on the web-site of the Insurers.
How the policy data needed for valuation is accessed.
a.
The company maintains the Policy data in the policy administration system called Life Asia.
Data is obtained every month from 'Life Asia'.
A series of validation checks is performed to ensure the accuracy and completeness of the data.
The Actuarial Valuation is done using the Actuarial Software - Prophet.
b.
How the valuation bases are supplied to the system
1)
Interest : Maximum and minimum interest rate taken for each segment
i.
Individual Business
1.
Life- Participating policies
2.
Life- Non-participating Policies
3.
Annuities- Participating policies
4.
Annuities – Non-participating policies
5.
Annuities- Individual Pension Plan
6.
Unit Linked
7.
Health Insurance
ii.
Group Business
1. Life- Participating policies
2.
Life- Non-participating Policies
3.
4.
5.
6.
7.
2)
Annuities- Participating policies
Annuities – Non-participating policies
Annuities- Individual Pension Plan
Unit Linked
Health Insurance
Mortality Rates : the mortality rates used for each segment
i.
Individual Business
1. Life- Participating policies
2.
ii.
Life- Non-participating Policies
3.
Annuities- Participating policies
4.
Annuities – Non-participating policies
5.
Annuities- Individual Pension Plan
6.
Unit Linked
7.
Health Insurance
Group Business
6.00%
SP: 8.75%, RP: 5.75%
NA
7.25% pa
NA
6% p.a.
NA
NA
Credit Life - 6%
Other than Credit Life-Unearned Premium basis used for valuation
NA
5.8% p.a.
NA
NA
NA
Varies from 110% to 115% of IALM 94-96 (modified) Ult. (depending
upon the product stucture)
Varies from 90% to 110% of IALM 94-96 (modified)Ult. (depending upon
the product stucture)
NA
75% of Mortality for Annuitants LIC 96-98 Ultimate Rates
NA
96% of IALM 94-96 (modified) Ult.
NA
1.
2.
Life- Participating policies
Life- Non-participating Policies
3.
4.
Annuities- Participating policies
Annuities – Non-participating policies
NA
Varies from 85% to 88% of Mortality for Annuitants LIC 96-98 Ultimate
Rates
5.
6.
7.
Annuities- Individual Pension Plan
Unit Linked
Health Insurance
NA
NA
Credit Life - 105% of IALM 94-96 (modified) Ult.
Other than Credit Life - Unearned Premium basis used for valuation
NA
NA
3)
Expenses :
1.
2.
Life- Participating policies
Life- Non-participating Policies
3.
4.
Annuities- Participating policies
Annuities – Non-participating policies
NA
5.
6.
Annuities- Individual Pension Plan
Unit Linked
NA
7.
8.
Health Insurance
Group - Credit Life
NA
9.
Group - Annuities (Non-Participating)
Bonus Rates :
5)
Policyholders Reasonable Expectations
Taxation and Shareholder Transfers
Basis of provisions for Incurred But Not Reported (IBNR)
Change in Valuation Methods or Bases
i. Individuals Assurances
1. Interest
2. Expenses
3. Inflation
7)
8)
Immediate Annuity ( version 1 ) Rs. 528 p.a. per policy
Immediate Annuity (version 2 ) 0.525% of first year Annuity payment
RP:Rs.660 p.a. per policy,
SP:Rs.350 p.a. per policy (All plans except Dhan Suraksha Express),
SP: 1% of Premium -Dhan Suraksha Express
Rs.55.125 p.a. per member - Ashiana & Suraksha Plan,
Rs. 26.25 per member - Ashiana Plus Plan
2.1% of the annuity payment made in the first year
Inflation @ 5.25% p.a.
Valuation was conducted taking into consideration the loading for bonus
used in pricing.
4)
6)
Rs.519.75 p.a. per policy
RP: Rs.519.75 p.a. per policy (All Non PAR products except Defined
Growth Endowment Plan),
RP: Rs 504 + 2.1 % of Premium (Defined growth Endowment Plan),
SP: Rs.250 p.a. per policy (Pure Term & Premier Protection Plan),
SP:Rs.396 p.a. per policy (Defined Benefit Endowment Plan) ,
SP: Rs. 504 (Defined Growth Endowment Plan)
4. Mortality
ii. Annuities
1. Interest
a. Annuity in payment
b. Annuity during deferred period
c. Pension : All Plans
2. Expenses
3. Inflation
4. Mortality
iii. Unit Linked
1. Interest
2. Expenses
3. Inflation
4. Mortality
iv. Health
1. Interest
2. Expenses
3. Inflation
4. Morbidity
v. Group (Credit Life)
1. Interest
2. Expenses
3. Inflation
4. Mortality
Reserves has been calculated on sufficient prudent basis
13.519% (Policyholder Tax Rate)
Calculated using Basic Chain Ladder Method.
No change
No change
No change
Reduced from 160% to 115% (of IALM 94-96 (modified)Ult) in Instant
Endowment product.
No change
No change
No change
No change
No change
No change
No change
No change
No change
No change
No change
NA
NA
NA
NA
No change
No change
No change
No change
Margin for adverse deviation basis
1.Interest rate varies from 5.5% to 7% ( depending upon product structure)
Reduced the MAD interest rate from 50 basis point to 25 basis point in Jeevan Safar product
2.Mortality varies from 92.5% to 125% of IALM 94-96 (modified)Ult (depending upon product structure- except Annuity product)
Annuity Product - 70% to 85% for Annuitants LIC 96-98 Ultimate Rates (depending upon product structure)
Reduced the MAD mortality rate from 165% to 125% of IALM 94-96 (modified)Ult in Instant Endowment product.
3.Expenses
4.Inflation
Individual Rs.275 to Rs.693.00
Group (Credit Life) Rs.57.88
@5.5% p.a.
14.1625%,