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EZ 54: Expected death strain formulas
or “Formulas for calculating potential insurance payouts due to death”
You could also call this:

“Calculating the average risk for multi-person life insurance policies”

When you have a life insurance policy that covers more than one person, there’s a special way to calculate something called the ‘expected death strain’. Instead of working out the chance of a claim for each person separately, you can use one common number for everyone on the policy. This number should be a fair guess at the average chance of a claim happening because someone dies during the year. But you need to be careful when you pick this number. You should think about how the claims might be different for each person on the policy. You also need to consider that the insurance company might have set aside different amounts of money for each person. By using this method, you can make your calculations simpler while still being fair to everyone covered by the policy.

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Next up: EZ 56: Expected death strain formula (life): when annuity payable on death

or “Calculating the value of annuities paid on death for life insurance policies”
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Part E Timing and quantifying rules
Terminating provisions: Expected death strain formulas

EZ 55Expected death strain formulas: option when more than 1 life insured

  1. This section applies when a life insurance policy covers more than 1 life insured.

  2. In using the relevant expected death strain formula, the life insurer may use as claim probability a common factor for all the lives insured under the policy.

  3. The common factor must be a reasonable approximation of the average probability of a claim arising under the policy for each life insured’s death in the income year. It must be weighted as necessary to take account of—

  4. differing claims for individual lives insured under the policy; and
    1. differing amounts in the life insurer’s actuarial reserves for individual lives insured under the policy.

      Notes
      • Section EZ 55: inserted, on , by section 199(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).