Pricing risk- data is available on the premium rates charged by life insurance companies. Are there differences between large firms and small firms? Between mutual firms and proprietary firms?

Abstract

Life insurance companies are important part of the economy. They have charges on their policies which cover their expenses and make a profit. This study seeks to find the reasons why charges of life insurance companies differ. Exploiting recently available data from the Financial Services Authority, this dissertation use a regression model to test if firm size and organizational form are significantly determining charges. In addition, data are used to estimate the price of different product characteristics in the UK stakeholder & personal pension and investment bonds markets. The results show that firm size, organizational form and product characteristics have significant relationship with charges to some extent. Pricing strategy is also taken into consideration. The findings show that if insurance companies have low charges for personal pension, there is high probability they will have low charges for investment bonds