IC-22 Formula Sheet
Ten formulas, what each one is for, and a worked rating example.
IC-22 is mostly a knowledge paper, but a few calculations sit underneath it: how much extra mortality a proposal carries, how that becomes a rating or a flat extra, whether the life insured's build is in range, and whether the cover asked for is financially justified.
These ten formulas cover them. A worked rating example follows the table, and the FAQs work through human life value.
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The 10 Formulas
1
Formula
Mortality ratio
Expression
Mortality ratio (%) = Actual deaths ÷ Expected deaths × 100
Use it for
Comparing a group's deaths with standard tables. 100% is standard.
2
Formula
Extra mortality
Expression
Extra mortality (%) = Mortality ratio − 100
Use it for
How much worse than standard a life or group is.
3
Formula
Numerical rating (debits and credits)
Expression
Total rating (%) = 100 + Sum of debits − Sum of credits
Use it for
Adding up each impairment's debit and each favourable factor's credit.
4
Formula
Table rating
Expression
Table number = Extra mortality ÷ 25 (common convention)
Use it for
Converting extra mortality to a substandard table, often Table A = 125%, B = 150%, C = 175%, D = 200%.
5
Formula
Flat extra premium
Expression
Annual flat extra = Rate per ₹1,000 × Sum assured ÷ 1,000
Use it for
A fixed extra charge for a temporary or constant extra risk, such as a hazardous job.
6
Formula
Body mass index (BMI)
Expression
BMI = Weight (kg) ÷ Height (m)²
Use it for
Checking build against the insurer's height and weight limits.
7
Formula
Human life value (income replacement)
Expression
HLV = Net annual income to family × [1 − (1 + r)^−n] ÷ r
Use it for
The present value of the income a family would lose, where r is the discount rate and n the working years left.
8
Formula
Income multiple limit
Expression
Maximum total cover = Annual income × Age-based multiple
Use it for
Quick financial check on total cover in force plus applied for. The multiples vary by insurer.
9
Formula
Affordability ratio
Expression
Affordability (%) = Total annual premium ÷ Total earned income × 100
Use it for
Whether the premium is sustainable for the proposer.
10
Formula
Amount reinsured (surplus)
Expression
Amount ceded = Sum assured − Retention
Use it for
How much of a large policy goes to the reinsurer above the insurer's retention limit.
| # | Formula | Expression | Use it for |
|---|---|---|---|
| 1 | Mortality ratio | Mortality ratio (%) = Actual deaths ÷ Expected deaths × 100 | Comparing a group's deaths with standard tables. 100% is standard. |
| 2 | Extra mortality | Extra mortality (%) = Mortality ratio − 100 | How much worse than standard a life or group is. |
| 3 | Numerical rating (debits and credits) | Total rating (%) = 100 + Sum of debits − Sum of credits | Adding up each impairment's debit and each favourable factor's credit. |
| 4 | Table rating | Table number = Extra mortality ÷ 25 (common convention) | Converting extra mortality to a substandard table, often Table A = 125%, B = 150%, C = 175%, D = 200%. |
| 5 | Flat extra premium | Annual flat extra = Rate per ₹1,000 × Sum assured ÷ 1,000 | A fixed extra charge for a temporary or constant extra risk, such as a hazardous job. |
| 6 | Body mass index (BMI) | BMI = Weight (kg) ÷ Height (m)² | Checking build against the insurer's height and weight limits. |
| 7 | Human life value (income replacement) | HLV = Net annual income to family × [1 − (1 + r)^−n] ÷ r | The present value of the income a family would lose, where r is the discount rate and n the working years left. |
| 8 | Income multiple limit | Maximum total cover = Annual income × Age-based multiple | Quick financial check on total cover in force plus applied for. The multiples vary by insurer. |
| 9 | Affordability ratio | Affordability (%) = Total annual premium ÷ Total earned income × 100 | Whether the premium is sustainable for the proposer. |
| 10 | Amount reinsured (surplus) | Amount ceded = Sum assured − Retention | How much of a large policy goes to the reinsurer above the insurer's retention limit. |
What the Symbols Mean
- Standard life
- A life expected to experience the mortality the premium rates assume, scored at 100%.
- Debit and credit
- Points added for an adverse factor (a high BMI, raised blood pressure) or taken away for a favourable one (good lipids, a clean family history).
- Flat extra
- An extra premium per ₹1,000 of sum assured that does not depend on age, often used for occupational and avocational risks.
- Retention
- The most an insurer keeps on any one life for its own account; the rest is reinsured.
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Worked Example: From Medical Report to Table Rating
A 40-year-old proposer is 1.75 m tall and weighs 95 kg, with mildly raised blood pressure and good cholesterol readings. He applies for ₹50 lakh of term cover. Assume the insurer's manual gives these debits and credits.
- 1
Work out BMI
BMI = 95 ÷ (1.75 × 1.75) = 95 ÷ 3.0625 = 31.0. Assume the manual debits a BMI of this level +50.
- 2
Add the other factors
Raised blood pressure: +40. Good cholesterol: a credit of −15.
- 3
Total the rating
Total = 100 + 50 + 40 − 15 = 175%. Extra mortality = 175 − 100 = 75%.
- 4
Convert to a table
At 25% per table, 75 ÷ 25 = 3, which is Table C (175%). The proposal is accepted at a Table C substandard premium.
- 5
Compare a flat extra
If instead the risk were a hazardous hobby rated at ₹3 per ₹1,000, the flat extra would be 3 × 50,00,000 ÷ 1,000 = ₹15,000 a year on top of the standard premium.
Multiple Extras and Flat Extras Do Different Jobs
A table rating scales up the mortality cost, so it suits risks that grow with age, such as diabetes or heart disease. A flat extra adds the same amount per ₹1,000 whatever the age, so it suits risks that do not, such as an occupation. Questions often test which one fits the impairment.
FAQs
How do I calculate human life value?expand_more
Take the income the family would lose each year (income minus the earner's own expenses and taxes), and find its present value over the working years left. For a 35-year-old with ₹12 lakh income, ₹4 lakh of personal costs and 25 working years at 8%: ₹8,00,000 × 10.6748 = about ₹85.4 lakh.
What does a mortality ratio of 140% mean?expand_more
The group or life is expected to have 40% more deaths than standard. For example, 42 actual deaths against 30 expected gives 42 ÷ 30 × 100 = 140%, so 40% extra mortality.
Is every table worth 25%?expand_more
It is the most common convention and the one textbooks use, but insurers' manuals set their own table steps. In the exam, use the step the question gives you.
How is the reinsured amount found under a surplus treaty?expand_more
Subtract the retention from the sum assured. On a ₹1.2 crore policy with a ₹40 lakh retention, ₹80 lakh is ceded to the reinsurer.
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