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Creating Policy Object

To begin, we need to initialise a policy object which contains all relevant parameters describing the policy.

Functions

Account Based Pension

create_policy_AP(balance, expenses)

   Parameters:

     balance : numeric

       Initial balance of Pension account

     expenses : numeric

       Initial yearly expenses for policyholder

   Returns:

     Policy object

   Usage:

ap <- create_policy_AP(400000, 60000)

Reverse Mortgage (NNEG)

create_policy_RM(value, LVR, trans_cost, margin)

   Parameters:

     value : numeric

       Initial value of property

     LVR : numeric

       Loan to Value ratio for PH

     trans_cost : numeric

       Transaction cost associated with sale

     margin : numeric

       Lending margin

   Returns:

     Policy object

   Usage:

rm <- create_policy_RM(100000, 0.4, 0.01, 0.05)

Life Annuity

create_policy_LA(benefit, defer = 0, increase = 0)

   Parameters:

     benefit : numeric

       Annual benefit for policy

     defer : numeric

       (Optional) Deferment period of policy

     increase : numeric

       (Optional) Annual rate of increase for policy

   Returns:

     Policy object

   Usage:

la <- create_policy_LA(60000, 5, 0.04, 0.05)

Care Annuity (LTC)

Note

Care annuities are evaluated based on the 3-State or 5-State model outlined in the Health State module. Parameters should be vectors of length 2 or 4 (as no benefits paid whilst PH is dead, policies are only characterized by remaining states).

create_policy_CA(benefit, increase, min)

   Parameters:

     benefit : vector

       Annual benefit for each policy

     increase : vector

       Annual rate of increase for each policy

     min : vector

       Minimum guaranteed period for each policy

   Returns:

     Policy object

   Usage:

ca <- create_policy_CA(c(60000, 1200), c(0, 0.04), c(8, 0), c(0.04, 0.05))

Pooled Annuity

create_policy_PA(benefit, size, interest)

   Parameters:

     benefit : numeric

       Initial annual benefit for policy

     size : numeric

       Size of pool

     interest : numeric

       Assumed investment earnings rate (flat)

   Returns:

     Policy object

   Usage:

pa <- create_policy_PA(60000, 1000, 0.04, 0.05)

Variable Annuity (GMWB)

**create_policy_VA(value, length, prop, g_fee) **

   Parameters:

     value : numeric

       Initial Account value (single upfront premium)

     length : numeric

       Length of contract (in years)

     prop : numeric

       Proportion of the premium that can be withdrawn annually

     g_fee : numeric

       Continuous guarantee fees for GMWB

   Returns:

     Policy object

   Usage:

va <- create_policy_VA(100000, 40, 0.4, 0.02)