This subject develops mathematical techniques which can be used to model and value cash flows that are dependent on events such as death, survival, illness and retirement. Specific topics include defining assurance and annuity contracts, evaluating expected values and variances of the present values of payments under these contracts, calculating net premiums and net premium reserves of insurance contracts, techniques to deal with contracts that involve two lives, pricing, profit-testing and cash flow projections of conventional and unit-linked products.
|Academic unit:||Bond Business School|
Delivery & attendance
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At Bond University, we carefully develop subject and program outcomes to ensure that student learning in each subject contributes to the whole student experience. Students are encouraged to carefully read and consider subject and program outcomes as combined elements.
Program Learning Outcomes (PLOs)
Program Learning Outcomes provide a broad and measurable set of standards that incorporate a range of knowledge and skills that will be achieved on completion of the program. If you are undertaking this subject as part of a degree program, you should refer to the relevant degree program outcomes and graduate attributes as they relate to this subject.
Subject Learning Outcomes (SLOs)
On successful completion of this subject the learner will be able to:
- Define simple assurance and annuity contracts, and develop formulae for the means and variances of the present values of the payments under these contracts, assuming constant deterministic interest.
- Describe the principal forms of heterogeneity within a population and the ways in which selection can occur.
- Describe and use practical methods of evaluating expected values and variances of the simple contracts.
- Describe and calculate, using ultimate or select mortality, net premiums and net premium reserves of simple insurance contracts.
- Describe and calculate, using ultimate or select mortality, net premiums and net premium reserves for increasing and decreasing benefits and annuities.
- Describe and calculate gross premiums and reserves of assurance and annuity contracts.
- Define and use functions involving two lives.
- Describe and illustrate methods of valuing cash flows that are contingent upon multiple transition events.
- Describe and use methods of projecting and valuing expected cash flows that are contingent upon multiple decrement events.
- Describe and use projected cash flow techniques for use in pricing, reserving, and assessing profitability.
|Essay||Assignment 1||5%||Week 4||1, 2, 3, 4.|
|Essay||Assignment 2||15%||Week 9||6, 7, 8, 9.|
|Paper-based Examination (Open)||Comprehensive Final Examination||45%||Final Examination Period||1, 2, 3, 4, 5, 6, 7, 8, 9, 10.|
|Paper-based Examination (Open)||Mid-semester Examination||35%||Week 7 (Mid-Semester Examination Period)||1, 2, 3, 4, 5.|
- * Assessment timing is indicative of the week that the assessment is due or begins (where conducted over multiple weeks), and is based on the standard University academic calendar
- C = Students must reach a level of competency to successfully complete this assessment.
|High Distinction||85-100||Outstanding or exemplary performance in the following areas: interpretative ability; intellectual initiative in response to questions; mastery of the skills required by the subject, general levels of knowledge and analytic ability or clear thinking.|
|Distinction||75-84||Usually awarded to students whose performance goes well beyond the minimum requirements set for tasks required in assessment, and who perform well in most of the above areas.|
|Credit||65-74||Usually awarded to students whose performance is considered to go beyond the minimum requirements for work set for assessment. Assessable work is typically characterised by a strong performance in some of the capacities listed above.|
|Pass||50-64||Usually awarded to students whose performance meets the requirements set for work provided for assessment.|
|Fail||0-49||Usually awarded to students whose performance is not considered to meet the minimum requirements set for particular tasks. The fail grade may be a result of insufficient preparation, of inattention to assignment guidelines or lack of academic ability. A frequent cause of failure is lack of attention to subject or assignment guidelines.|
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Policy on late submission and extensions
A late penalty will be applied to all overdue assessment tasks unless an extension is granted by the subject coordinator. The standard penalty will be 10% of marks awarded to that assessment per day late with no assessment to be accepted seven days after the due date. Where a student is granted an extension, the penalty of 10% per day late starts from the new due date.
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Feedback on assessment
Feedback on assessment will be provided to students within two weeks of the assessment submission due date, as per the Assessment Policy.
If you have a disability, illness, injury or health condition that impacts your capacity to complete studies, exams or assessment tasks, it is important you let us know your special requirements, early in the semester. Students will need to make an application for support and submit it with recent, comprehensive documentation at an appointment with a Disability Officer. Students with a disability are encouraged to contact the Disability Office at the earliest possible time, to meet staff and learn about the services available to meet your specific needs. Please note that late notification or failure to disclose your disability can be to your disadvantage as the University cannot guarantee support under such circumstances.
Develop formulae for the means and variances of the present values of the payments under these contracts, assuming constant deterministic interest.
Explain why it is necessary to have different mortality tables for different classes of lives. Explain the theoretical basis of the use of risk classification in life insurance.
Describe and use practical methods of evaluating expected values and variances of the simple contracts defined in objective 1.
Describe and calculate, using ultimate or select mortality, net premiums and net premium reserves of simple insurance contracts.
Extend the techniques of Objective 4 to calculate the expected present value of an annuity, premium, or benefit payable on death, which increases or decreases by a constant compound rate. Calculate net premiums and net premium reserves for contracts with premiums and benefits which vary as described.
Define the gross future loss random variable for the benefits and annuities. Calculate gross premiums using the equivalence principle. Define and calculate the gross premium reserve.
Extend the techniques of objectives 1-6 to deal with cash flows dependent upon the death or survival of either or both of two lives.
Construct formulae for the expected present values of cash flows that are contingent upon multiple transition events, including simple health insurance premiums and benefits, and calculate these in simple cases. Regular premiums and sickness benefits are payable continuously and assurance benefits are payable immediately on transition.
Use multiple decrement tables to evaluate expected present values of cash flows dependent upon more than one decrement, including those of pension schemes.
Describe and use projected cash flow techniques, where and as appropriate for use in pricing, reserving, and assessing profitability.