DETERMINATION OF LIFE INSURANCE PREMIUM AMOUNT BY COMBINING THE TRUE FRACTIONAL PREMIUM AND APPORTIONABLE FRACTIONAL PREMIUM METHODS

Fidiria Destika Muhlis; Novianita Achmad; Armayani Arsal

doi:10.62567/micjo.v3i3.3208

Authors

Fidiria Destika Muhlis Universitas Negeri Gorontalo
Novianita Achmad Universitas Negeri Gorontalo
Armayani Arsal Universitas Negeri Gorontalo

DOI:

https://doi.org/10.62567/micjo.v3i3.3208

Keywords:

Life Insurance, Fractional Premiums, True Fractional Premiums, Apportionable Fractional Premiums, Hybrid Model, TMPI 2023

Abstract

Fractional premium schemes in life insurance generally follow two main approaches: True Fractional Premiums, which are easy to implement but less fair to policyholders who die mid-period, and Apportionable Fractional Premiums, which are more actuarially fair but administratively more complex. This study designs a Hybrid Fractional Premiums model that combines both approaches through a weighted linear combination using parameter , based on the 2023 Indonesian Mortality Table (TMPI), a 5% interest rate, a 10-year coverage period, and monthly premium payments. This descriptive quantitative study applies actuarial mathematics, covering the present value of insurance benefits, true fractional, apportionable fractional, and hybrid annuity factors, up to premium determination using the equivalence principle. The results show that the hybrid premium consistently lies between the true fractional and apportionable premiums, increases sharply with the insured's age, and is higher for males than females due to differences in mortality rates. Changes in the value of have a linear effect on the premium, although the impact is relatively small (a difference of less than IDR 200 per month). The hybrid model with is recommended as the optimal balance between actuarial fairness and ease of implementation, offering a more flexible alternative for premium determination in Indonesia's life insurance industry.

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