COMPARISON OF PREMIUM CALCULATION WITH MORTALITY TABLE AND MODIFIED DE MOIVRE METHOD ON N YEAR TERM LIFE INSURANCE

Abstract

In Indonesia, the insurance firm usually calculate the premiums by Indonesia Mortality Table. But, there are several method to calculate the premiums like De Moivre Method. De Moivre Method is a method to calculate the probability of survival and dies from an uniform distribution. This method is simpler method than others but the result is very far with Indonesia Mortality Table. The author wanted the De Moivre Method can run in Indonesia by equalizing the probability values by Modified De Moivre Method. This method is almost same with De Moivre Method but there is an alpha value as a parameter. The author compared and equalied the probability of survival between the Indonesia Mortality Table 2019 and Modified De Moivre Method by adjusting the alpha values. Therefore, Modified De Moivre can run in Indonesia. The author used the median and harmonic mean to find the alpha value. Median is a measure to find the central point from increasing order of size sample and harmonic mean is a measure to find the average where it is sensitive with small value. This study used term life insurance because this type has a low premium. From this study, it can be concluded that the cheaper premium is the Modified De Moivre Harmonic Alpha Value Method and the most expensive is the Modified De Moivre Median Alpha Value Method because the harmonic alpha value is smaller than others. The smaller of alpha value, then the survival probability will increase, the dies probability will decrease, and the premium will decrease.