Analysis of Stochastic Model and Life Insurance Premiums Allocation for Insurance Development in Indonesia

Abstract

Indonesia has a very high level of disaster and accident prone. Based on state mortality risk data, one of the financial instruments capable of reducing the risk of death and helping victims and their families is life insurance. The life insurance business in Indonesia is quite large, starting from March 2017, the total assets of all insurance companies in Indonesia, both life insurance and general insurance, reached 981 trillion rupiah, with the distribution of 3.38% of sharia insurance assets and the rest non-sharia insurance. In writing this paper, it discusses the life insurance model using a stochastic process, especially for insurance without using savings. The method in this study uses a monte carlo insurance premium simulation with the processed data is data taken from the financial services authority in the form of Indonesian Insurance Statistics. Based on the review, it can be concluded that the coverage period and administrative costs are very influential in determining the portion of the premium that is included in the participant's savings. Period of coverage or proportion of administration is inversely proportional to portion of the premium that is put into customer savings and the investment situation does not really have an effect on the allocation of premiums for the participants