Child Mortality

The Problem

A �child rider� is a supplementary insurance added to an existing policy that provides benefits for the children of the primary insured. The primary benefit is a payment of $1000 in case of the death of any one of the children regardless of the number of children, genetic or adopted. The current cost for a �child rider� is $6.00. This price was determined in 1953 and has not changed since then. Is this a good price for insurance?

All children of the primary insured are covered by the child rider policy from age 14 days to 21 years. Infants from 0-14 days have the highest mortality rate and are therefore not covered. Is there still a need to not insure infants until after 14 days? Could the age restriction be changed from 14 days to 7 days?

Areas of Application

Algebra
Exponential Growth & Decay
Modeling
Finite Series
Basic Statistics
Graphing analysis

Explanation of Alignment with Standards

Background Information

The current cost for a �child rider� is $6.00 which provides a death benefit of $1000 until 21. This price was obtained by an non-rigorous �back of the envelope� calculation that assumed an average number of children per policy (2.3) and an average child mortality rate (1/1000). The result was a cost of $2.30 for a thousand dollars of coverage. The company added $3.00 for profit and expenses and then rounded up to obtain the $6.00 annual premium.

Ignoring the nonrigorous methodolgy of the insurance company, how much should the child rider cost to cover the expected claims when

You don't know the number of children per family.
You don't know the ages of the childred in the family.
The price was originally computed using life tables from the 1950s.

Materials Included

Mortality Rates from 1953 & 1999
List of possibly simplifying assumptions
Interactive Excel Worksheet

Download

Download the complete unit here:	File Name	Size
Compressed Zip File	Child Mortality.zip	124k

To Download:

Windows: right-click on the filename above and choose: "Save Target As..."

Mac/Apple: hold the CTRL key, click on the filename above, and choose: "Download to Disk..."

Maintained by webmaster@wpi.edu
Last modified: Jun 25, 2010, 14:56 UTC