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  • Vaishnavi Rastogi

Exposed to Risk (Part - 1)

If you are going to work in a Life Insurance company, the concept of Exposed to Risk is very important to understand.

This concept is asked in many job interviews also.


Meaning of Exposed to Risk: Exposed to risk is a total waiting period during the observation period by all lives taken into the study.

Let’s look at the difference between initial and central exposed to risk.

The difference can be explained mathematically, the Initial Exposed to Risk was developed within the binomial framework, the lives who die have to be counted as exposed to risk until the end of the year of age (not the investigation), whereas the central exposed to risk is developed within the Poisson framework, it only measures the total time under observation (the difference being if a life dies, the life is only counted as at risk until the moment of death).

Here’s an example to explain it:

You have 100 people in the study, and 1 dies over the year.

Your initial exposed to risk is 100, your central exposure to risk is 99.5 (i.e. the average number of lives over the year).

To calculate exposed to risk, we need to record

  • dates of birth

  • dates of entry into observation

  • dates of exit from observation

For a life with aged x, the central exposed to risk is the difference between Date A and Date B, where Date A: the latest of

  • the date of reaching age x

  • the start of the investigation

  • the date of entry (joining)

Date B: the earliest of

  • the date of reaching age x+ 1

  • the end of the investigation

  • the date of exit

Read the article on the whole process of calculating Exposed to Risk in the next article.


Written by: Vaishnavi Rastogi


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