Hi, Can anyone please confirm what is mortality selection? I am confused with this context from question 22.2 part ii) "for larger increase in term, this means that policyholder retains the same life cover for a reduced premium. Theoretically, this gives scope for mortality selection against the company" Please explain
Hi Mahima Mortality selection occurs whenever a policyholder takes an action that is advantageous because they are in poor health. In the case above, the policyholder may be choosing to alter the contract deliberately to get the life cover more cheaply because they do not believe they will live to pay the premiums in full. Best wishes Mark
