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European Actuarial Journal

07-02-2025 | Original Research Paper

Actuarial aspects of subjective survival probabilities with applications in insurance pricing

Authors: Apostolos Bozikas, Apostolos Papachristos

Published in: European Actuarial Journal

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Abstract

Subjective survival probabilities reflect individuals’ views about own future survival and they vary based on socio-demographic factors. Actuaries and demographers use parametric survival models, often calibrated on population mortality data, to capture and interpret mortality trends. Recent research highlights the importance of considering subjective survival beliefs in mortality studies. In the same spirit, this work aims to evaluate the applicability of subjective survival probabilities in insurance pricing. More specifically, the proposed methodology focuses on the construction of subjective survival tables for pricing insurance products based on various parametric modelling approaches. Our results indicate that subjective survival probabilities contain information useful for predicting actual mortality and pricing life insurance products for the U.S. population.

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Appendix
Available only for authorised users
Footnotes
1
Similar assumptions have been adopted in the literature, see [21, 38].
 
2
Alternative formulations were also employed by other authors, see [3, 23].
 
3
Subscript c denotes the individual’s birth cohort that corresponds to each HRS wave per age, i.e., \( c = w-x \).
 
4
2021 is the last year with available data from the National Center for Health Statistics and the HMD.
 
5
The analysis for other ages is available upon request.
 
6
We also employed the Root of Mean Squared Error (RMSE) measure (not displayed), which produced very similar results.
 
7
The Levenberg–Marquardt algorithm can be implemented using the “nls.lm” R function of the “minpack.lm” package [12]. For an interested reader, we also refer to [29, 43] for a comprehensive review on the computational issues regarding the optimization algorithms, as well as the CRAN Task View for Optimization and Mathematical Programming (available at https://​cran.​r-project.​org/​web/​views/​Optimization.​html), which provides an extensive list of optimization routines available in R.
 
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Metadata
Title
Actuarial aspects of subjective survival probabilities with applications in insurance pricing
Authors
Apostolos Bozikas
Apostolos Papachristos
Publication date
07-02-2025
Publisher
Springer Berlin Heidelberg
Published in
European Actuarial Journal
Print ISSN: 2190-9733
Electronic ISSN: 2190-9741
DOI
https://doi.org/10.1007/s13385-025-00411-0