Analyzing the Effects of changes in Mortality Rates on Life Insurance Pricing in Zambia: A Case Study of ZISC Life
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Date
2024
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University of Lusaka
Abstract
This research delves into the intricate relationship between changing mortality rates and the pricing dynamics of life insurance premiums in Zambia. Focusing on the life insurance sector, specifically the impacts on policyholder premiums, the study aims to unravel how mortality rates, and external factors, including age and gender, influence the financial sustainability of life insurance products. The study's foundation lies in recognizing life insurance as a crucial financial safeguard against unforeseen circumstances, primarily the policyholder's death or incapacity. To contextualize the research, Zambia's insurance landscape is outlined, emphasizing the prevalence of two main types—General insurance and Life insurance—with a specific focus on the latter.
The core problem addressed is the significant role that mortality rates play in determining life insurance premiums. Drawing parallels to a similar study conducted during the COVID-19 pandemic, where rising mortality rates prompted life insurance companies to revise premiums, the research underscores the need for life insurance companies in Zambia to continuously monitor and adapt to changing mortality trends. Notably, the study highlights shift in mortality rates attributed to factors such as improvements in healthcare, climate change, geographical location, lifestyle changes, and diet, all of which are pivotal in shaping premium calculations. The study employs a case study approach, examining ZISC Life insurance company in Lusaka, Zambia. It explores the effects of changing mortality rates on life insurance pricing, drawing conclusions from the gathered data and offering insights into revenue trends, market share, growth patterns, mortality trends, pricing dynamics, and the correlation between mortality rates and premiums. The conclusions point towards the dominance of Whole Life Policies in one of the insurers, emphasizing the need for diversification in product offerings. Growth trends, despite a temporary decline during the pandemic, indicate a resilient market, encouraging insurance companies to adapt to evolving customer needs. Gender-specific mortality rates underscore the importance of gender-sensitive policy pricing, and the linkage between mortality rates and premiums emphasizes the necessity of accurate risk assessment. The research recommends a dynamic pricing strategy based on regular assessments, diversification of product offerings, enhanced customer education on premium determinants, adaptation to changing demographics, exploration of additional factors influencing premiums, and preparation for external factors. These recommendations, if incorporated into strategic planning, position insurance companies to navigate the evolving landscape successfully, fostering sustained growth and competitiveness.