Life pricing: a profitable premium is a cash-flow problem
A life pricing model projects premiums, benefits, expenses, lapses, investment effects and capital requirements over the product’s life. A quoted premium is an output; assumptions and product design determine whether that output is useful.
The work behind a new product
An analyst implements benefit rules, creates model points, validates cash flows, runs sensitivities and prepares profitability exhibits. Reviewers need to see the selected profit measure, discount basis, expense allocation and capital treatment. A product approval memo explains the result and the material risks.
A scenario worth checking
An acquisition expense is paid at issue while premiums arrive over many years. Higher early lapse can leave less premium to recover the initial cost. On another product, lapse can release costly guarantees. The direction is product-dependent: “higher lapse is good” is not a general rule.
Test mortality, expenses and lapse jointly where there is a reason for dependence. A collection of one-variable shocks can miss an interaction.
After launch
Pricing work continues through actual-versus-expected studies, distribution monitoring and repricing decisions. An experience study must distinguish changes in the risk population from changes in underlying experience.
Pricing assumptions are also not automatically valuation assumptions. Their purpose, margins, governance and reporting rules can differ. Ask how the pricing model connects to product implementation and in-force monitoring.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.