PRICING ANALYSIS USING TARGET PROFIT MARGIN, ROI, AND SOLVENCY ON ENDOWNMENT LIFE INSURANCE PRODUCTS

Abstract

One of the important parts of forming insurance products is determining premium rates on an insurance policy contract. A new strategy is needed in determining premium rates. Funds managed by insurance companies are obtained from premium payments by the insured and capital provided by the financier to the insurance company. The funds are used to pay benefits to the insured, meet the costs required by the insurance company and provide benefits to the financier. Insurance companies must consider profits in calculating premium rates for these funds to be managed properly. In modeling the profit that a company needs to achieve, the management and shareholders usually provide a certain profitability measure, such as Return on Investment, Profit Margin, Spread Margin, Surplus strain, etc. This study discusses pricing calculations and analysis using several profitability targets, namely Profit Margin (PM), Return on Investment (ROI), and Solvency on one of the dual-purpose insurance products at PT Asuransi Jiwa XYZ with the assumption of grading down interest every two years. The results show that calculating the premium value using the profitability target is more profitable using the Profit Margin target than the ROI target because Profit Margin does not produce multiple conditions. In addition, it is found that the ROI and Profit Margin before Solvency are greater than the ROI and Profit Margin after Solvency. This is because in calculating premiums with Profit Margin and ROI targets after Solvency is imposed, the company's liability limit is higher than it should be.