Life insurance companies rely on mortality rate models to set appropriate premiums for their services. Over the past century, average life expectancy has increased and continues to do so, necessitating more accurate models. Two commonly used models are the Gompertz-Makeham law of mortality and the Lee-Carter model. The Gompertz-Makeham model depends solely on an age variable, while the Lee-Carter model incorporates a time-varying aspect which accounts for the increase in life expectancy over time. This paper constructs both models using training data acquired from Skandia Mutual Life Insurance Company and compares them to validation data from the same set. The study suggests that the Lee-Carter model may be able to offer some improvements compared to the Gompertz-Makeham law of mortality in terms of predicting future mortality rates. However, due to a lack of qualitative data, creating a competitive Lee-Carter model through Singular Value Decomposition, SVD, proved to be problematic. Switching from the current Gompertz-Makeham model to the Lee-Carter model should, therefore, be explored further when more high quality data becomes available.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:kth-349028 |
| Date | January 2024 |
| Creators | Ljunggren, Carl |
| Publisher | KTH, Skolan för teknikvetenskap (SCI) |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
| Relation | TRITA-SCI-GRU ; 2024:144 |
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