By: Insurance Studies Institute
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
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 Life Policy Group:
This is an excellent study worthy of reading and debate. However, investors should note that with more lives in your investment the greater the chance of good, consistent returns. Investors should also note the emphasis on medical underwriting.
http://www.insurancestudies.org/wp-content/uploads/2010/08/ISI_Evolution-of-Life-Expectancies-Aug-4-2010.pdf
Tags: life expectancies, life insurance secondary market, selling life insurance policies