Pricing life settlements in the secondary market for the insured with cancer based on the amount of healthy lifestyle score

Document Type : Original Article

Authors
Mahboubeh Aalaei 1
Esmaeel Safarzadeh 2
Khadijeh Ebrahimnejad 3
1 1. Assistant Prof., Personal Insurance Department, Insurance Research Center, Tehran, Iran
2 2. Assistant Prof., Department of Economics, Faculty Social Sciences and Economics, Alzahra University, Tehran, Iran
3 3. MA of Economic Development and Planning, Faculty of Social and Economics, Alzahra University, Tehran, Iran
10.30495/jik.2024.72312.4229
Abstract
Paying attention to new fields, including secondary markets, in order to increase the penetration rate of life insurance to fulfill the important legal task of the 6th Development Plan, is of particular importance. In this article, we are going to price life settlements in the secondary market using methods of adjusting mortality probabilities and applying deterministic, probabilistic, and stochastic approaches for the insureds with different cancers with regard to healthy lifestyles. The research method in this study is quantitative. Using the methods of probability adjustment for the insured with non-standard health status and based on the amount of healthy lifestyle score, the price of life settlements in the secondary market has been calculated. For this purpose, Iranian life table, which has been issued by the Central Insurance since the beginning of 1400, has been used to calculate the standard and adjusted mortality probabilities. In addition, the results were compared for insureds with different cancers with and without healthy lifestyle scores. The findings of the research for selling a whole life insurance policy in the secondary market indicate that for a person who has a type of cancer with a high survival rate and has a lifestyle score higher than 6, it is better to surrender his life insurance policy instead of selling it in the secondary market. In other cases, especially in cases where lifestyle is involved in calculations, the probabilistic and stochastic approaches have more reasonable results than the deterministic approach.
Keywords
Pricing
Life settlements
Secondary market
Lifestyle
Monte Carlo simulation
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