No Arbitrage Policy Pricing Model Based On Utility Function

Nowadays, there are mainly two theories in insurance pricing-the traditional pricing theory and the financial pricing theory. The traditional pricing model doesn't take into account the different needs of different people, and it looks like fair for the insured but not the insurer. The financial pricing model also has some shortcomings. The insurance products and the financial products are different, the insurance products are consumer goods, but the financial products are for investment, so it's not suitable to copy the theory of financial products directly.To solve the shortcomings of the two models mentioned above, this paper proposes the no-arbitrage pricing theory based on utility function. The utility function is introduced into the pricing model with the no-arbitrage theory, which can make the premium be more marketable to achieve different premium for different people. There are two kinds of utility in this paper, and the author compares the differences on various forms of utility function. The selection of the form of utility function cannot be ignored when using this model for pricing.In the empirical analysis, there are two utility functions which fit the traditional pricing model very well, but the author doesn't think that the model using these two functions is certainly the best. We cannot measure the models in this paper just to the scale of the traditional model. Which model is correct to price for the insurance? It needs to go through practice and market testing.Finally, the author makes some simulation experiments, founding that the no-arbitrage pricing model based on the utility function can fit the traditional model very well, which shows that the method is feasible. Different from the traditional method's not considering the market's differences, this method considers the differences between people in the market. Meanwhile, compared with other method, the value of the wealth is not measured on the actual monetary of the wealth, but the utility it brought to the people, which is the biggest advantage of this method.