ABSTRACT
The foregoing methods were developed to fit insurance classes in
which premiums can be changed at the renewal dates, as is typical ly
the case wi th general insurance business. They cou ld also be applied
to life insurance for short-term analysis or where life business is
written, or premiums guaranteed, for periods of a year or less. H o w -
ever, for long-term investigations there is a crucial difference between
general insurance business and most life insurance business. Life
insurance premiums are usually fixed for the whole term of insurance,
often for a decade or more. Whereas the non-life insurer can adjust
the current p remium rates fairly rapidly i n the event of an adverse
development of the business, the life insurer usually has no similar
tool available i n respect of policies i n force. This presents difficulties
for both rat ing and reserving. The life insurer has to be prepared to
cope wi th potential fluctuations and changes i n the return on invest-
ment, expenses, mortal i ty , inval idi ty , etc. wh ich might occur i n the
more or less remote future. The threats posed by inflation, for example,
assume greater importance i n this environment. Life insurance, there-
fore, requires it own techniques, which are the subject matter of this
chapter.
