On the impact of asymmetric dependence in the actuarial pricing of joint life insurance policies

Abstract

Multipopulation mortality modeling is a significant research problem in actuarial science. Mortality functions involving multiple lives are also essential to determine the pricing of premiums. Moreover, the lifetime models based on dependence and asymmetry are more realistic. Hence, this paper applies an asymmetric copula model, Generalized FGM (GFGM) to model the bivariate joint distribution of future lifetimes. Premiums of first-death life insurance products are calculated based on the proposed model and compared with independent and symmetrical models. The results display that asymmetry has a significant effect on premium calculations. Also, it is concluded that the lowest premiums are generally in asymmetric lifetime models. This paper also provides analytical examples for the proposed model with Gompertz’s marginal law.