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

A whole life policy pays Rs 6,00,000 at the end of the year of death. The reserve at the end of the year is Rs 2,50,000 for a survivor. Which change would increase the death strain at risk?

A fall in the year-end reserve to Rs 2,00,000 raises the death strain at risk, from 3,50,000 to 4,00,000, because DSAR is the sum assured minus the reserve. Mortality rates, policy numbers and actual deaths do not change the per-policy amount.

  1. AA rise in the assumed mortality rate
  2. BA fall in the year-end reserve to Rs 2,00,000Correct
  3. CA rise in the year-end reserve to Rs 3,00,000
  4. DA fall in the number of policies in force
  5. A rise in the actual number of deaths

Explanation

DSAR = sum assured - year-end reserve = 3,50,000 now. If the reserve falls to 2,00,000, DSAR becomes 4,00,000, an increase. Mortality rates, policy counts and actual deaths affect expected or actual strain totals but not the per-policy DSAR.

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