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IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Death strain at risk, expected and actual death strain, mortality profit

A policy with sum assured Rs 8,00,000 payable at the end of the year of death has a year-end reserve of Rs 1,50,000 for survivors. The assumed mortality rate is q = 0.004 and 2,000 such policies are in force at the start of the year. What is the expected death strain (EDS) for the year?

The expected death strain is Rs 52,00,000. The death strain at risk is 8,00,000 minus 1,50,000, which is 6,50,000, multiplied by the expected number of deaths, 2,000 times 0.004, which is 8.

  1. ARs 52,00,000Correct
  2. BRs 5,20,000
  3. CRs 64,00,000
  4. DRs 60,00,000
  5. Rs 5,20,00,000

Explanation

DSAR = 8,00,000 - 1,50,000 = 6,50,000. Expected deaths = 2,000 x 0.004 = 8. EDS = 8 x 6,50,000 = 52,00,000. Using the full sum assured gives 64,00,000, which ignores the reserve.

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