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Calculation of alterations and Select vs. Ultimate mortality

B

bryce

Member
hi, my question is with reference to Assignment Q4.7 (ii)

At the alteration point, the new policy has an increase in sum assured which would require underwriting. This would suggest the mortality basis used should be Select afterwards however the solutions indicate Ultimate mortality used. Why is this?

Thanks!
Bryce
 
Hi Bryce

Good question :)

I'd say the solution has used ultimate mortality, because the question hasn't said for sure that further underwriting is done at the alteration point. The reading about alterations talks about the possibility of underwriting when terms are altered, but I'd probably only reflect it in my alteration calcs if the question said for sure.

I agree that for an increase in sum assured, maybe the company would require some health evidence, but it could be less stringent than the underwriting process it would go through at policy outset, so the use of Select may not be justified.

Hope this helps
Lynn
 
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