What is often assessed when determining the premiums for life insurance policies?

When determining the premiums for life insurance policies, one of the primary factors assessed is expected mortality. This refers to the actuarial estimates of the likelihood that policyholders will pass away within a certain timeframe, based on statistical data such as age, health conditions, lifestyle choices, and other risk factors. Insurers use this information to predict how long they are likely to be paying claims and to set premiums accordingly. The underlying goal is to ensure that the premiums collected will cover the anticipated claims while also allowing for operational costs and profits.

The expected mortality rate is crucial because it directly influences the insurer's risk exposure. If the expected mortality is high, the premiums must be higher to reflect the increased likelihood of claims being filed. Conversely, if expected mortality is low, it may lead to lower premiums, as the insurer anticipates fewer claims.

While other factors, such as investment returns and market demand, can influence the overall financial strategy of an insurance company, they do not directly shape the fundamental calculation of life insurance premiums to the same extent as expected mortality. Historical performance can inform future expectations but does not play as direct a role in premium determination as assessing the expected mortality.