Extract from Evolution of Life Expectancies in the Life Insurance Secondary Market…Current Trends and New Developments
Insurers Utilize Life Expectancy Analyses When Issuing Life Insurance Policies, But Their LEs Differ From LEs Developed For Older People Selling Their Life Insurance Policies
By: Insurance Studies Institute
In a generalized sense, insurers use life expectancies to price life policy products when they use mortality tables to provide a guideline of the life expectancies of each cohort market group. Mortality tables and ratings allow them to project future premium revenues vs. expected death benefit payments (including lapses), thereby knowing the potential profit potential for each line of insurance product. Based on the estimate of the insured’s life expectancy, insurers will assign the insured into one of several typical risk classifications. (These classifications may differ among insurance companies.)
The assigned risk category will determine the policy premium cost and/or whether or not a life insurance policy will be issued.
Commentary by Michael Abraham:
This is an excellent study worthy of reading and debate, but again you should note that the more lives in your investment the greater the chance of good, consistent returns. You should also note the emphasis on medical underwriting. In this commentator’s view much more emphasis should be placed upon lifestyle.
Published on 16 Aug 2010 at 06:07 am
