Modern insurance companies calculate individual life insurance premiums based on advanced actuarial models that take into account various factors related to the risk of death and the characteristics of the insured person. Contributions are therefore individualized depending on many variables.

The key factors influencing the insurance premium are:

Age

-The age of the insured person is one of the most important factors. The older the person, the higher the probability of death within the insurance period, which results in higher premiums. Contributions are calculated on the basis of life tables and statistical data on the life expectancy of people in different age groups.

Health condition

-Insurers often require detailed health information and sometimes medical tests. Chronic diseases such as diabetes, heart disease, high blood pressure, or other serious ailments may lead to higher premiums. Sometimes people with very poor health may even be excluded from insurance.

Lifestyle

-Factors such as smoking, alcohol abuse, drug use and other risky behaviors may increase your premium. Smokers, for example, often pay much higher premiums than non-smokers.

-Physical activity and a healthy lifestyle can help reduce your premium.

Family history

-Insurers pay attention to family health history, especially in the case of hereditary diseases that may affect the insured person’s life expectancy. If there is a family history of serious illnesses such as cancer, heart disease or diabetes, this may lead to an increase in premiums.

Occupation and hobby

-Some professions that carry a greater risk to life (e.g. work at heights, work in uniformed services, professional drivers or pilots) may result in higher premiums.

-Risky hobbies such as skydiving, diving or motor sports can also lead to higher premiums as they increase the risk of death.

Type and amount of insurance

-The sum insured is the amount that the insurance company will pay out in the event of the death of the insured person. The higher the insurance sum, the higher the premium.

-The type of policy also affects the premium. Term (temporary) insurance is usually cheaper than life insurance, which covers your entire life. Insurance with an investment element, where part of the premium is invested, may also have different rates.

Insurance period

-The duration of the policy affects the amount of the premium. The longer the insurance period, the lower the annual premiums because the insurance company has more time to collect funds.

Inflation and interest rates

-Inflation and the level of interest rates affect long-term forecasts about the value of money. Insurers may introduce mechanisms into premiums to take into account increases in inflation or changes in interest rates to ensure that benefits are paid at the appropriate value in the future.

Premium calculation: a modern approach

Modern insurance companies use advanced mathematical models and computer tools that allow for accurate estimation of premiums based on the analysis of large data sets. The key techniques are:

1. Machine learning algorithms: By analyzing huge amounts of data (e.g. health, demographic, lifestyle data), algorithms can create more precise risk models. This allows insurers to better individualize premiums.
2. Big Data: Insurers can use external data, such as demographic data, information about consumer habits (e.g. shopping in pharmacies, physical activity), which allows for even more detailed risk assessment.
3. Updated mortality tables: Insurers use the latest mortality tables, which are regularly updated based on demographic and epidemiological research, which allows for more accurate estimates of the likelihood of death in specific age groups.
4. Application of stochastic methods: Stochastic models are used to simulate various scenarios that may occur in the future, e.g. change in interest rates, changes in demographic structure, epidemics, etc. This helps to better forecast future payouts and calculate appropriate contributions.

Modern insurance companies use advanced mathematical, statistical and technological tools to precisely assess the risk associated with life insurance and adjust premiums to the individual characteristics of each client. Thanks to data analysis, machine learning algorithms and modern actuarial models, the premium calculation process is now more complex and precise than ever before.