Affiliation: | a Department of Statistics and Actuarial Science, Simon Fraser University, Burnaby, BC V5A 1S6, Canadab Empire Life Insurance Company, Kingston, ON K7L 3A8, Canada |
Abstract: | In this paper, we study the linear hazard transform and its applications in life contingencies. Under the linear hazard transform, the survival function of a risk is distorted, which provides a safety margin for pricing insurance products. Combining the assumption of α-power approximation with the linear hazard transform, the net single premium of a continuous life insurance policy can be approximated in terms of the net single premiums of discrete ones. Moreover, Macaulay duration, modified duration and dollar duration, all measuring the sensitivity of the price of a life insurance policy to force of mortality movements under the linear hazard transform, are defined and investigated. Some examples are given for illustration. |