Shanghai Second Polytechnic University¹
Pudong, Shanghai
Actuarial Program²
Illinois State University
Normal, Illinois
Department of Information Safety³
Office of Information Security
University of Illinois at Chicago⁴
Chicago, Illinois

A New Design of Premium Payments and Insurance Benefits in Various Forms of Life Insurance Designed to Protect the Insurer against Adverse Selection

In this paper, we discuss ways to mitigate adverse selection in life insurance with alternative policy designs, which involve different arrangements of premium payments and various benefits. We focus on three types of life insurance: term or whole life insurance, life annuity, and endowment insurance. We propose some improvements in product designs, which are expected to reduce adverse selection. Among them are annually increasing benefits for life insurance with level premium, and annually decreasing functions.

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