Group life insurance in Kuwait : problems and prospects

Abstract

The Kuwaiti government obliged firms to cover part of employee's risks through legislation in 1965 and 1977. Employers should cover risks as death or job injury due to or during work. This had affected the group life insurance (GLI) market. The thesis examines the economics of this market. Problem of choosing the right life table with respect to Kuwaiti mortality rates is tested. The efficiency of using English life tables to estimate mortality rates in Kuwait GLI market is examined. The effects of GLI underwriters on the market are investigated. The Social Security Services (SSS) are offered for Kuwaitis only, Non-Kuwaitis face more economical insecurity than Kuwaitis do. Therefore, the demand for employees' group investment plan to cover future security facing Kuwaiti and non-Kuwaiti workers, in particular, is also considered. The thesis suggests several methods to solve the problems facing the Kuwait GLI market. Kuwaiti Mortality rates are estimated using data from both the Social Security Association (SSA) and a sample of term group life insurees to be compared with English and American life tables. Methods of avoiding lack of information, adverse selection, and moral hazard in Kuwait GLI market are proposed. Finally, the advantages of introducing group investment plan are examined, and it was shown that these could alleviate SSS problems. Use of group investment plan should reduce the cost of the SSS for Kuwaitis, secure part of Non-Kuwaitis risks, and assist insurers to avoid or reduce their economic problems.