Game Theory and Life Insurance

The insurance industry has long been applying game theory to evaluate whether or not individuals are insurable and determine how much premium to charge them based on their apparent needs. This interaction between the consumer and the insurance company can be characterized as a game because not only are they playing against one another but each party is waging on an outcome more beneficial to them. In a traditional life insurance, there are many variables to consider when utilizing game theory to form a strategy as there are investment components along with complex riders. Thus, in order to keep the game relatively simple, this paper will assume the insurance being considered is term life and use game

This insurance program gives the holder an opportunity to make use of the interest from the build up savings to assist in paying premiums over time. Universal whole life insurance is designed to give more flexibility than whole life insurance. The premiums are broken down by the insurance firm into two categories including the saving component and cost of insurance. The insurance cost has to be covered so that the policy will remain in force, but the premiums can be shifted over a certain time depending on the holder’s needs (Zeckhauser,

Cost-utility analysis is the best choice in assessing insurance companies to be certain that they are complying with new regulations or guidelines. Input would be measured in dollars and the output would be measured in the number of companies complying with enforced laws and the number of citizens receiving care. The fixed utility element of cost-effectiveness would not be effective because the input would increase over time. Furthermore, the fixed budget element wouldn’t be effective because this solution is focused on penalizing insurance companies that do not comply with regulations. Cost-benefit analysis would not be used because it requires money to be computed into the input and output, which is not needed in making sure companies

Have you ever fallen behind on your monthly premiums? Have your policies accidentally lapsed due to non-payment? In fact, there are many options available to prevent a policy from lapsing if a policy owner discontinues premium payment on a policy. Alternatively, they provide policyholders who choose to terminate cash-value insurance policies with several choices of using cash surrender value. The above features describe the basic function of Nonforfeiture options.

In ancient China, during an era known as “Warring States Period”, China was divided and conquered by independent seven warring states. King Wei of Qi, who was the emperor of Qi State, and the general Tian Ji, were both horse racing fans. They always bet heavily on winning and losing. This is just the background of Tian Ji’s horse racing strategy. Now here comes the dilemma. The horses can be divided into three different speed classes: fast, medium and slow. Since the king’s horses are always better than Tian Ji’s, Tian Ji always lose the game. However, Tian Ji can choose the order of the horses to compete. There are three rounds of a race and anyone who wins two rounds can be the final winner.

For example in the Prisoner dilemma, ‘confess’ is the optimal choice for both players so it is the Nash equilibrium. Though, the combine payoff for both players to confess is lower than if both players to deny, which shows that t he Nash equilibrium can also be Pareto inefficient in a finite game. If there is some way for them to cooperate through

evaluating the underwriters and selecting a syndicate, and decide to include some uncertainty to be

The experiment is composed of three games that are all variations of a two-person public good game where the equilibrium predictions guarantee unequal payoffs. In the game’s basic setup, two players provide a public good by contributing a certain amount gi and keeping xi for their own private consumption. The goal of the game is to find the amount allocated towards the public good. The first variation of the game is simultaneous, and both players choose their contributions at the same time. The last two variations are sequential. One version, referred to as the sequential game, allows for “free riding” while the other is a best-shot game

We consider a two player game, where one player (the proposer) makes an offer to split an endowment/an amount of money between the two players and the other player (the responder) can accept or reject the offer in an ultimatum game (but has no choice in the dictator game).

Mixed Strategies 8.1 Definition and Examples 8.1.1 What Is a Mixed Strategy? 8.1.2 Yet More Examples 8.2 An Implication 8.3 Mixed Strategies Can Dominate Some Pure Strategies 8.3.1 Implications for Dominant Strategy Solution and IEDS 8.4 Mixed Strategies Are Good for Bluffing 8.5 Mixed Strategies and Nash Equilibrium 8.5.1 Mixed-Strategy Nash Equilibria in an Example 8.6

Recently, insurers introduced online insurance policies. This got a wide spread acceptance from many clients in that it is quick, easy and convenient. It is also cheaper in that a person doesn’t have to travel

Selective Insurance and Risk Management Services to be known as SIRM for short, will be formed as a sole proprietorship, independent insurance agency owned and operated by Mark Bazari. This plan is written as a guide for financing, start-up and management of the new business and will serve as the basis for measurement. The following is a summary of the main points of this plan.

Figure of Merit (FOM) is a mathematical expression that accounts for detection efficiency and background noise, and is used to optimize system performance. The desire of this study is to maximize the detection system’s efficiency and minimize its background signal. The highest optimization potential occurs at FOM’s peak value. Finding the optimum counting region of interest is an iterative process and an important first step in the characterization of a detection system. A standard solution/sample’s FOM value is determined by first counting it and determining its efficiency and spillover. The detector electronics for most detection systems have multiple adjustable parameters (e.g. applied voltage, amplifier gain, low level discriminator), which are adjusted to eliminate electronic noise. These parameter optimizations are useful for reaching the optimum counting conditions. In equation 1, ε is the counting efficiency in percent and B is the radiation background count rate. Maximizing the FOM can optimize the conditions in achieving the highest efficiency for a given background.

In life, losses are sometimes unavoidable. People may become ill and lose income or savings to pay off medical bills. Individuals or their relatives may die of illness or accidents. People’s homes or other property may suffer damage or theft. All these activities in the environment of man are subject to the risk of loss from unforeseen events. To lessen this burden on humans, insurance companies are formed and existed for decades with a common goal of pooling related risks and offering a cushion to the unforeseen circumstances. To expand the coverage of life insurance products, life insurance companies have recently begun offering complex policies with embedded options. Among them is the participating policies with interest rate guarantees and surrender options. Bacinello (2001), defined participating policy as a contract in which the policyholder is entitled to a share of the excess profit if the realized interest rate during the insurance period is above the assumed interest rate. The policy mechanism enables the insured to receive dividends (bonuses) in addition to the assured payments implied by the guaranteed interest rate. Owing to the existence of the interest rate guarantee, the policy has some features that resembles the European call options. This property is included in most real-life life insurance contracts in Ghana. There are numerous ways in which this profit-sharing is realized. The usual approach is to

The data was collected in controlled lab-in-the-field experiments carried out in Ethiopia. Insurance games were conducted with iddir members in addition to general information being collected specifically relating to these individuals .The games were carried out with an attached monetary reward, with the aim of gaining an understanding of the decision-making process of members given a particular scenario. There were four different sessions conducted in which members of the same iddir took part in particular games: the Index insurance with risk-sharing game, the index insurance without risk-sharing game , the indemnity insurance with risk-sharing game and the indemnity insurance without risk-sharing game. In each information environment, those participating in the experiment were given the choice to purchase 0, 1 or 2 units of insurance. Each session consisted of 40 members, with 10 sessions being conducted in total. Thus, 400 farmers were observed in total. There were 240 individuals participating in the indemnity sessions and 160 involved in the index sessions. Full training was given to farmers in the form of interactive games, with information and instructions being read out to those participating in the study before the final games were played. The purpose of this was to ensure that the farmers were capable of making informed decisions with regards to the risks that they were willing to take.