COMPARISON OF PREMIUM RESERVE CALCULATION ON TERM LIFE INSURANCE USING PREMIUM SUFFICIENCY AND NEW JERSEY METHOD

Abstract

Some life insurance companies can experience losses that can even lead to bankruptcy due to not being able to pay claims. This event can be anticipated by having a reserve fund that has been prepared and calculated properly. There are several types of insurance, one of which is term life insurance where the insurance pays benefits if the insured died before the insurance period ends. The purpose of this research is to calculate the amount of term life insurance premium reserves using the Premium Sufficiency and New Jersey methods since several other researchers have also tried to calculate using these methods, such as Aprijon (2020), Filemon (2022), and others, but none of those researchers have compared these two methods. The Premium Sufficiency method calculates the reserve using gross premium assumptions, while the New Jersey method calculates the reserve using adjusted net premium. This research is a quantitative research that will use some assumptions and also secondary data to calculate the premium reserve using both methods, and using Microsoft Excel to help on the calculation and the visualization of the results. In short term, for insurance companies that have limited funds at the beginning of the insurance contract period will be more suitable to use the New Jersey method because the reserves in the initial year are 0 so that the insurance company can use the existing funds to pay additional costs. While in long term, since the overall Premium Sufficiency reserve value from year to year is smaller than the New Jersey reserve value, insurance companies that in the future need larger funds to pay for other company needs will be more suitable to use the Premium Sufficiency method because the funds that need to be set aside as reserves are smaller, so that the remaining funds that are not set aside are greater than the New Jersey method and can be used for other needs. It can also be seen that at the end of the period the premium reserve accumulated using the Premium Sufficiency method is smaller than using the New Jersey method, where the amount of premium reserve using Premium Sufficiency and New Jersey method consecutively for male are Rp. 113.200.444,943 and Rp 124.761.949,747, while for female are Rp. 70.183.195,271 and Rp. 82.491.748,159.