With benefit function b constant over each year the expression from A-x(b)=Ax(b~) reduces to?

 When the benefit function

� is constant over each year, the expression from �−�(�)=��(�∼) simplifies as follows:

Given:

  • ��(�) represents the net single premium for insurance payable at the moment of death with a constant benefit function �.
  • �∼
  • b∼ represents the continuous equivalent of the constant benefit function �.

Explanation:

  1. Continuous Equivalent of Constant Benefit Function:


    • When the benefit function � is constant over each year, its continuous equivalent �∼ is a step function that remains constant between each integer age.

  2. Net Single Premium Equality:


    • The expression ��(�)=��(�∼) indicates that the net single premium for insurance payable at the moment of death remains the same whether we use the discrete constant benefit function � or its continuous equivalent �∼.

    • This equality holds true because the net single premium calculation takes into account the present value of future benefits, mortality rates, and discounting factors.

    • As long as the present value of future benefits is the same, the net single premium remains unchanged regardless of whether the benefit function is constant or continuous.
  3. Simplified Calculation:


    • Using the continuous equivalent �∼ simplifies the calculation process, especially for mathematical operations such as integration, differentiation, and manipulation.

  4. Practical Application:


    • This simplification aids actuaries and insurance professionals in modeling and analyzing insurance products with constant benefit structures.
    • It ensures consistency and accuracy in premium calculations, allowing for easier comparison and evaluation of different insurance policies.

In summary, the expression ��(�)=��(�∼) illustrates that the net single premium for insurance payable at the moment of death remains the same whether the benefit function is represented as a discrete constant function � or its continuous equivalent �∼.

This simplifies calculations and ensures consistency in premium evaluation for insurance products with constant benefit structures.

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