The article analysed and solved the problems of constructing mortality tables and determining the amount of payment for the foreseeable future, which are relevant in connection with the development of the classical life insurance in Russia and the growing role of methodological developments aimed at determining the cost of insurance coverage. The algorithm calculation is implemented on the example data of a region of the Russian Federation. The practical signi cance of the proposed algorithm is that it can be used by insurance companies when calculating the tari of life insurance in the region.
Life insurance is one of the most e ective ways to solve the problem of shortage of regional nancial resources through the mobilization and transformation of available funds of the population into investments. The development of life insurance industry, on the one hand, serves as a source of investment funds bearing a principally long-term character, on the other hand, acts as a guarantor of social security of the population, protecting the interests of policyholders [12].
In the life insurance implementation in the region it is necessary to consider
its features, as the subjects of the Russian Federation are characterized by di
erent levels of socio-economic development, the diversity of national composition
of the population, sharp di erences of climatic conditions, which directly leads to
the demographic situation, determines the level of mortality in the region [
The calculation algorithm 1. In the rst step of life insurance payment modelling it is necessary to solve the problem of building a regional mortality tables. The table construction includes several stages: { Calculation of baseline values for all ages on the basis of the mortality statistics (distribution of deaths by age); { If necessary, processing of this range of values to remove distortion caused by age accumulation; { Interpolation of row of values to eliminate possible gaps or extrapolation to calculate the values for the older age groups; { Calculation of the remaining life table functions;
The main methodological problem of constructing mortality tables is associated with the transition from the actual age-speci c mortality rates to table probabilities of dying at a given age. Age-speci c mortality rates (mx) are calculated separately for men and women as the ratio of the number of deaths in a particular age by the average annual number of men or women in this age group: mx = nDx
~ nPx 1000%; where nDx { the number of deaths in the age range (x+n); nP~x { average annual population (men or women) in the age interval (x + n).
To go from the actual levels of age-speci c mortality rates mx to tabular probabilities qx we can use the analytical laws of mortality. These theoretical models allow us to identify the main patterns of interest to researchers, even a simpli ed study of reality. At the same time, some real mortality processes are well enough approximated by the considered analytical laws [14].
The most used \law of mortality" is a model Heligmen-Pollard, proposed by
the authors in 1980, which describes the change in the mortality rate, represented
by the ratio of (qx=(1 qx)) the probability of dying at age x to the probability
of surviving to age (x + 1) year of age x [
In the basis of the following law known as the law of Gompertz-Mackhame, lies the assumption that the intensity of mortality increases with age, at a geometric rate, i. e. x = A + Bcx, where A is the parameter responsible for the deaths that are not associated with health status and age, B is the coe cient of proportionality linking the mortality rate with the weakening of the vitality of the person, C { a parameter characterizing the rate of decrease of a person's ability to resist various health disorders. The law of Gompertz-Mackhame satisfyingly describes mortality only for the older age intervals. This can be explained by the reduced rate of death at an early age.
In 1939, Weibull as a simple approximation of the force of mortality suggested a power function x = kxn, which will determine the survival function and the curve of deaths
Z x
0 s (x) =
kundu = exp f (x) = s0 x = kxn exp
k n + 1
xn+1 k n + 1 xn+1 :
Erlang's model is a function of the form x = x=(a (x + a)). For Erlang's
model, 2nd order mortality curve is described by the formula f (x) = x=a2
e x=a, x 0, the survival function s (x) = (x + a)=a e x=a [
Also to describe mortality at di erent age intervals you can use the following nonlinear functions: logarithmic, exponential, power, hyperbolic, polynomials of various degrees.
The advantage of the theoretical models is that for them the probability characteristics of demographic indicators can be calculated on a small number of parameters. This fact is particularly important at the limited statistics. 2. To facilitate the calculations of the risk rates in the next step the table of switching functions is built. Standard switching functions are divided into two groups. The basis of the rst the number of survivors to a certain age is put, the second { the number of dying. The main in the rst group are the functions Dx and Nx:
Dx = lx x;
! Nx = X Dj ; j=x where { discounting factor in the compound interest rate i, and is determined by the formula = 1=(1 + i).
A-priory Nx = Nx+1 + Dx and N! = D! (! { the age limit adopted in the mortality table).
Function Dx is used for insurance on survival. Dx is the expected present value of the amount of insurance premiums for insurance on survival initial set of l0 with the condition of payment of a single sum insured upon reaching the age of x, switching function Nx is used to simplify the calculations of rent insurance. The meaning of this function is the following. At birth, a group of children numbering l0 is an insurance contract with a condition of payment of a lifelong annuity in size per unit at the beginning of each year, starting at age x, then Nx represents the present value of insurance payments or the total amount of one-time premium. The switching number of the second group is used to simplify calculations in life insurance in case of death:
Cx = dx x+1;
! Mx = X Cj: j=x
Each insurance company develops its own table of switching functions based
on its rates of return, the speci cs of the insurance eld and existing insurance
statistics [
In accordance with the above-mentioned there are the following types of life insurance: { insurance in case of death (distinguish between life and term insurance); { endowment insurance; { mixed life insurance.
Insurance in case of death. Risk covered by this insurance is the death of the insured person during the period of insurance. The insurer when the insured event guarantees the payment of the insured sum to the bene ciary. Contracts of this type are not associated with the provision of the property interests of the insured but, as a rule, his heirs and creditors.
At endowment insurance the risk of survival of the insured is insured before the end of the insurance period. It allows to raise the level of welfare of the insured person by creating savings. endowment insurance is insurance of a certain amount of money for a certain period. In the event of death of the policyholder during the period of validity of the contract the insurance sum is not paid and fees are not refundable.
Mixed insurance covers the risks of survival until the end of the period of insurance, death in action. 4. The size of the relative risk premium is determined. The risk premium is introduced for life insurance in case of death, the life insurance contract; endowment allowance is not entered as the insurance company pays the insurance indemnity only in case if the client survives until the end of the contract, i. e., the size and term of payment is known in advance to the insurer. And the insurance company provided by the correct choice of mortality tables and economically reasonable interest rate compounding means has no risk of exceeding the insurance premiums collected over the net premiums of life insurance on survival. In the contract of the mixed insurance two components are taken into account: life insurance and life insurance on survival for the same period. As the risk premium is calculated only on the rst component, the total net rate on the contract of the mixed insurance the risk premium will have little impact.
To determine the size of risk premiums the expectation EX, the variance
D( i), or standard deviation ( i), indicating the variation from the mean are
used. Total net premium P in this case can be calculated as P = EX + EX,
P = EX + ( i) or P = EX + D( i), where X is the total amount of claims,
EX { its expected value, , , { ratios, re ecting the sustainability of the
portfolio and scatter payouts relative to the average value. You can also enter the
risk premium of a mixed type, which when receiving a new risk takes into account
its dependence with the already existing portfolio, but also directly determines
the degree of accumulation of risks as P = EX + EX + ( i) + D( i) [
In the case of homogeneity of insurance portfolio, all three approaches will give the same results, and the relative increase risky for life insurance in the case of life at age x will be: x = t r px qx 1 pn ; where t { the reliability coe cient, qx { the probability of death at age x, px { the probability of survival at age x, n { the volume of the insurance portfolio.
It should be noted that the share of risk premiums in the insurance rate
with increasing age of the insured is reduced due to the fact that with increasing
age the probability of death, respectively, reduces the probability of survival
[
The insurance company in order to establish competitive rates, while growing the insurance portfolio, may establish a lower risk premium than it allows the portfolio. In this case, a signi cant factor is the insurance potential of the region, i. e. the number of able-bodied population, living standards, incomes, prospects of socio-economic development of the region, the level of insurance culture, the presence of competitors, etc. 5. The last step is to de ne the tari rate life insurance as the sum of the main net rates, risk premiums and load. The load and the brave extra charge are determined by each insurance company on its own, depending on the portfolio, of doing business expenses, pro t margins, etc.
Let's determine on the basis of regional statistics data the size of net-net rates for life insurance classes for male and female population, promising annual number of concluded life insurance contracts on the territory of the Republic of Buryatia in the period until 2018.
To determine the main net rates types of life insurance for the future period
it is necessary to forecast age-speci c mortality rates of male and female
population of the region. As a method of forecasting age-speci c mortality researcher
selected the method of \law of mortality" that allows to con ne the data of
regional statistics and meet the requirements of short-term population projection.
Extrapolation method, being less time consuming, does not provide a qualitative
forward-looking information, due to the unstable, spasmodic development in the
retrospective period [
To select analytical functions describing the best way the process of extinction
of the region's population ages, the author in the environment of MS Excel has
calculated the parameters of analytical models of age speci c mortality rates [
Analytical record for the following models [
The mortality rate among men aged 18{35 is described by the Weibull model and in the older age group of 36{70 the variation of mortality depending on the age and the other is described by an exponential function. The discrepancy of the mortality patterns of young and older ages is due to di erences in the increment of the force of mortality at di erent age intervals, there has been a relatively strong surge in the death rate in the transition from the age of 35 to 36. Mortality among women all over the considered interval is described by an exponential law, but the construction of a model for a single group of 18{70 leads to a deterioration of the quality criterion modelling characteristics, so it seems appropriate to partition the interval 18{70 years, in two age groups: 18{35 and 36{70 years. Table 1 presents the results of modelling age-speci c mortality rates for men, similar calculations were performed for the female population of the Republic of Buryatia for the period 1990{2015.
The absolute increasing in mortality by age in the male population of the Republic of Buryatia at the age of 18{35 with increasing age decreases. For example, the mortality rate in 2015 during the transition from the age of 20 to 21 increased by 0.00024h, from the age of 30 to 31 { 0.00019h, i. e. in the age group of 20{35, the speed of increment of intensity of mortality is reduced. On the contrary, in the age group of 36{70 years, with increasing age, the rate of increment of the mortality rate increases, averaging 41 years old 0.0049h, and in 61 years old { 0.0138h, i. e. at the age of 41 out of 1000 people die at 4.9 man more than at the age of 40, and at the age of 61 there are 13.8 more than at the age of 60.
Changing the age of the female population of the Republic of Buryatia mortality intensity is described by an exponential function and in 2015 at the age of 35 years is equal to the increment of the mortality forces 0.0011h, in 60 years { 0.0063h.
Let's examine graphically changes in age-speci c mortality rates of male and female population of the Republic of Buryatia for the period of 2009{2015. During this period, values of age-speci c mortality rates do not reveal directional changes in time (Fig. 1 for females and Fig. 2 for males).
Let's analyse the changing values of age speci c mortality rates, net rates types of life insurance depending on the uctuations of the parameters of the models of mortality in the value of its standard deviation. Changing model k parameter x = kxn level of age-speci c mortality of the male population aged 18{35 years, the value of the standard deviation of the standard of the average kaverage leads to a change in the appropriate direction by an average of 2.38% of your age-speci c mortality in this group, which in turn implies to increase or decrease the net rate of life insurance in case of death by an average of 2.2%, on survival { by 0:06%, mixed { 0:06%. if the parameter naverage, is changed to the value of the standard deviation of the average n average, that the mortality rate at each age is also changed by an average 8%, respectively the net rate of death is changed by 7.87%, endowment { by 0:24%, mixed { 0.24%.
In the older age group, uctuations of the model parameters x = aebx also not have a signi cant impact on the net rates. Fluctuations a and b lead to changes in mortality rates at the age of 36{70, an average of 11.8% and 4.6%, respectively, net rates in case of death by 10.9% and 4.33%, { endowment at 1:34% and 0:69%, on the mixed { 0.06% and 0.03%.
For the female population of the Republic of Buryatia age group of 18{35, the deviation of the parameters a and b models x = aebx from the mean to the of the standard deviation leads to a change in age-speci c mortality rates at 7.14 and 0.6%, respectively, changing the net interest rates on the types of life insurance are as follows: in the event of death, 6.7 and 0.6%, endowment { 0:05 and 0:01%.
In the group of 36{70 deviation a and b leads to changes in mortality rates, average age of 13.5% and 7.55%, respectively, of the net rates on life insurance in case of death by 12.9% and 7.37%, endowment { 0:59%{0:45%, on the mixed { 0.03% and 0.02%.
The changes in the development of demographic processes are long-term, therefore, it's fair to assume that in the absence of crisis in the economy in the short term age-speci c mortality rate of the population has the same distribution and is described by a single model. In this case, we can assume that in the short term demographic indicators will be close to a certain constant value, although the study of them in the long run they will de nitely show the trend of development. In the absence of trends in mortality at age x the model parameters are also constant.
To de ne the parameters of prognostic models describing the probability of death at age x of male and female population of the Republic of Buryatia in the planning period of 2016{2018, we will use model of ordinary regression. The application of this model requires the following assumptions: parameters of the incoherent models tend to some constant value; the regression errors are normally distributed.
Thus, it can be assumed that the parameters of the models in the period of 2009{2015 form a sequence of changes in the average expected level which does not depend on the ow of time. To examine the hypothesis let's test the time series of indicators for the presence of trends in their development (Table 2). The most common in the practice of test series for the presence of trends is the use of statistical testing of hypotheses about the immutability of trends in a number, i. e. it is necessary to check the number on the accident distribution. For this purpose T-cumulative criterion method of comparing average levels of time series, Abbe criterion (criterion of consecutive squares of the di erences) are most often used [13].
Testing con rmed the hypothesis about the absence of trends in parameters of models of male mortality (Table 2) and female mortality population over the period of 2009{2015, which form a stationary series.
To build predictive models of age-speci c mortality of men aged 18{35 data were used from 17 age groups for 7 years (119 cases) and at the age of 35{70, data of 35 age groups for 7 years (245 cases).
The level models of age-speci c mortality of the male population of the Republic of Buryatia have the form: tcalc tcalc ^E = 0:00003 x1:7441;
(34:15) ^E = 0:00194 e0:0523x; (46:76)
R2 = 0:929;
Building predictive models for age-speci c mortality of women were carried out similarly as for men. tcalc tcalc
Descriptive quality models that characterize the age-speci c mortality of the female population of the Republic of Buryatia, are higher than the models that characterize the age-speci c mortality of the male population. Men's mortality is more subject to uctuations depending on the in uence of social factors, economic, than female mortality.
A key indicator of the prospects for the development of life insurance in the region is determining the potential number of concluded life insurance contracts. The number of life insurance contracts is directly proportional to the collected insurance premiums, the ratio is the average insurance premium. Under the inuence of various factors, such as in ation, growth of welfare of the population, changing the average term of the life insurance contract, etc., the average insurance premium may be also changed. 5
On the basis of predictive models of age-speci c mortality levels the lump-sum net-rates for male and female population of the Republic of Buryatia were built for the future period 2016{2018.
The demographic situation in the region has stabilized and while maintaining the favorable trends of social and economic development, at least not deteriorate. Therefore, insurers, who lead insurance activities on the territory of the Republic of Buryatia, have some possibility to implement one of the basic principles of determining insurance rates in the main part of the net rate { rate stability dimensions. Also the age-speci c mortality prediction will help to determine the parameters of the actuarial model of the relative risk premium [11]. 11. Patrick, B.: Modern actuarial risk theory. Journal of Risk and Insurance 70(2) (2003) 12. Rappaport, A.: Demography and Retirement: The Twenty-First Century. Praeger
Publishers, Westport (2002) 13. Sadovnikova, N.A., Shmoilova, R.A.: Fundamentals of statistical modeling. Publishing house of Moscow State University of Economics and Statistics, Moscow (2002) 14. Shaw, C., Blakely, T., Tobias, M.: Mortality among the working age population receiving incapacity bene ts in new zealand, 1981{2004. Social Science & Medicine 73, 568{575 (2011) 15. Wilson, T.: Quantifying the uncertainty of regional demographic forecasts. Applied Geography 42, 108{115 (2013)