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MARITAL STATUS AS A RISK FACTOR IN LIFE INSURANCE: AN EMPIRICAL STUDY IN TAIWAN

Published online by Cambridge University Press:  22 February 2016

Hsin Chung Wang ,
Jack C. Yue  and
Yi-Hsuan Tsai
Hsin Chung Wang
Affiliation:
Department of Finance and Actuarial Science, Aletheia University, New Taipei City, Taiwan, Republic of Chinaau4369@mail.au.edu.tw
Jack C. Yue
Affiliation:
Department of Statistics, National Chengchi University, Taipei, Taiwan, Republic of China Risk and Insurance Research Center, National Chengchi University, Taipei, Taiwan, Republic of Chinacsyue@nccu.edu.tw
Yi-Hsuan Tsai
Affiliation:
Department of Risk Management and Insurance, National Chengchi University, Taipei, Taiwan, Republic of Chinaisuan.tsai@gmail.com
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Abstract

Gender and age are the top two risk factors considered in pricing life insurance products. Although it is believed that mortality rates are also related to other factors (e.g. smoking, overweight, and especially marriage), data availability and marketing often limit the possibility of including them. Many studies have shown that married people (particularly men) benefit from the marriage, and generally have lower mortality rates than unmarried people. However, most of these studies used data from a population sample; their results might not apply to the whole population. In this study, we explore if mortality rates differ by marital status using mortality data (1975–2011) from the Taiwan Ministry of the Interior. In order to deal with the problem of small sample sizes in some marital status groups, we use graduation methods to reduce fluctuations in mortality rates. We also use a relational approach to model mortality rates by marital status, and then compare the proposed model with some popular stochastic mortality models. Based on computer simulation, we find that the proposed smoothing methods can reduce fluctuations in mortality estimates between ages, and the relational mortality model has smaller errors in predicting mortality rates by marital status. Analyses of the mortality data from Taiwan show that mortality rates differ significantly by marital status. In some age groups, the differences in mortality rates are larger between marital status groups than between smokers and non-smokers. For the issue of practical consideration, we suggest modifications to include marital status in pricing of life insurance products.

Keywords

Marital statusrisk factorsmall area estimationlongevity riskrelational mortality model
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 46 , Issue 2 , May 2016 , pp. 487 - 505
Copyright
Copyright © Astin Bulletin 2016 

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