Maximizing Profit of Insurance Company with Considering Advantages Selection

The term life insurance can be purchased to mitigate financial problems resulting from premature death risk. The aim of this paper is how insurance company can obtain maximum profit and absorb low-level risk individuals for purchasing contract without offering different premium to each risk group. Therefore, two multi-period objective function was constructed for each risk group and one objective function for insurance company. This model was designed that each individual can decide keeping or selling the insurance policy. A numerical example was provided for this model and this model was solved by NSGA II in order to study how premium rate, interest rate, cost rate and period of contract can affect aims of the insurance company. We find that insurance company can achieve its goals with decreasing the cost rate, the interest rate and increasing the duration of the contract and premium.

Keywords:

Risk aversion , Adverse selection , Advantages selection , Asymmetric information , Multi objective , interest rate