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Insurance contracts portfolios with heterogenous parametric life distributions

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  • M. Dahan
  • E. Frostig
  • N. A. Langberg

Abstract

In this paper we consider two portfolios: one of m endowment insurance contracts and one of m whole life insurance contracts. We introduce the majorization order, Schur functions, and parametric families of distribution functions. We assume that the owners of the portfolios are exposed to different members of a known parametric family of distributions and study the effect of this stochastic heterogeneity on the premiums and death benefits of the insurance contracts. We show that the premiums paid in both contracts are Schur concave and that the death benefit awarded in the whole life contract is Schur convex. We provide upper and lower bounds for the premiums and for the death benefit, and compute the bounds for four parametric families of distribution functions used frequently in the Actuarial Sciences.

Suggested Citation

  • M. Dahan & E. Frostig & N. A. Langberg, 2004. "Insurance contracts portfolios with heterogenous parametric life distributions," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2004(6), pages 431-447.
    • Handle: RePEc:taf:sactxx:v:2004:y:2004:i:6:p:431-447
    DOI: 10.1080/03461230410020383
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