The Effect Of Longevity Risk On The Pricing Of Commercial Pension Insurance

With the accelerated process of China's population aging,pension gap is also increasing,the basic pension system has been difficult to maintain the future supply of old age.In this context,the commercial pension insurance as the most flexible way to supplement the basic pension system,its importance has become increasingly apparent.However along with the continuous improvement of our people's living standards and medical technology,the overall population mortality level will continue to reduce,the difference between prediction of the mortality and the life table given levels of mortality is widening,and lead to longevity risk of commercial endowment insurance market increasing seriously.In order to explore the commercial endowment insurance market longevity risk,this paper selects the CBD model and the Lee Carter model to fit the Chinese male mortality,and choose the best fitted model to forecast Chinese male 2016 mortality.In addition,due to the high age group mortality data cannot be obtained,the high age group by using the static model Gompertz model for predicting mortality.Considering of insurance companies are facing the crowd is not natural population,but after the adverse selection of the insured population.In this paper,the inverse selection factors of mortality improvement effect is also considered,to calculate a mortality rate of improvement factor,using this factor to adjust the natural mortality,getting the final mortality prediction results.Finally,the prediction of mortality data applications to the pricing of commercial endowment insurance,will get the sum assured.To contrast with the sum assured getting on the basis of ?The China life insurance industry experience life table(2000-2003)?in the male population pension business life table(CL3),the difference between the two is the longevity risk on the commercial endowment insurance pricing.Through theoretical and empirical research,this paper draws the following conclusions:Lee-Carter model is more suitable for the prediction of China's male mortality than CBD model.Under the Lee Carter model and Gompertz model,China's male population mortality prediction value was significantly lower than that of?the China life insurance industry experience life table(2000-2003)?given China's male population mortality(CL1),proved the longevity risk's existence preliminary.Adverse selection behavior does exist in the commercial endowment insurance market and the insured in order to achieve the maximization of individual utility,their adverse selection behavior will lead to mortality in commercial endowment insurance market are all low mortality rate insured.Adding the adverse selection adjustment factor of mortality prediction value was significantly lower than that of?The China life insurance industry experience life table(2000-2003)?,given in the pension business life table under the male population mortality(CL3).It is proved that in the market of commercial endowment insurance,policyholders potential actual mortality is significantly lower than expected,longevity risk of commercial endowment insurance market is also obvious.The business pension insurance's sum assured under the mortality prediction value is less than the sum assured on the basis of the CL3 life table.This shows that in the existence of longevity risk,using the life table to price the business pension insurance will lead to insufficient premium charge(or too high payment).In the long run,the insurance company will produce a loss.