Pricing a life insurance product is not a simple matter. Actuaries constantly study the evolution of society in order to accomplish two primary objectives: to offer advantageous and competitive products to consumers, and to ensure the profitability and profitability of the company.
An insurance company is first and foremost a for-profit organization. They have expansion objectives like all companies. In order to achieve them, they have an interest in developing products that are interesting for the whole or for certain niches of the market. Thus, a poorly priced product can greatly damage the reputation of the company, or jeopardize its profitability. This is why InfoPrimes can help you, thanks to its life insurance premium calculator, to get the best possible offer .
What is the life insurance premium?
The life insurance premium represents the amount that you must pay to the insurer in return for the financial risk incurred. Indeed, when you take out life insurance, the insurer undertakes to pay you a sum in the event of your death. This risk is assessed by actuaries based on a multitude of factors.
What are the different factors that can influence the price of life insurance?
Since this is life insurance payable on death, the main factor to take into consideration is the mortality rate. Actuaries analyze statistical data to study the death rates of different groups of people who have similar profiles. Following their analyses, they establish mortality tables which allow insurance companies to better evaluate the most probable moment and the number of deaths in the reference group.
Among other things, the mortality rate includes the following criteria:
Age and gender – The life expectancy of women is higher than that of men. In most cases, the price of life insurance for two people of the same age but of opposite sexes is lower for the woman.
Health status – During the screening process, insurance companies ask a series of questions, and may sometimes require their clients to undergo medical exams. If additional risks, or so-called “pre-existing” health conditions are detected, the insurer can revise the price of its life insurance upwards (always according to the mortality tables), or simply refuse to insure this. customer.
Lifestyle habits – Among other things, the consumption of tobacco, alcohol or drugs, the practice of sports or other physical activities have an influence on the price of life insurance.
The duration of protection
There are different types of life insurance products offered. For example, temporary coverage offers a benefit if death occurs during the insured period. In this way, the longer the insured period, the higher the price of life insurance. Permanent life insurance coverage is more expensive than term coverage.
The amount of the insured capital
Insurance companies have an interest in selling higher premiums to their customers. One way to encourage them to purchase more protection (also called “capital insured”) is to give volume discounts.
In this way, the same client who purchases life insurance for $100,000 will pay more money for each dollar insured than if he purchased protection for $500,000.
Insurance companies have to pay considerable sums of money to claim the insurance policy. To ensure that they will have the necessary liquidity to meet these financial obligations, insurance companies invest large sums of money.
This implies that they must make forecasts of the anticipated interest rate, and provide actuarial reserves in the event that interest income is lower than they had anticipated. They must allow for an acceptable profit margin when calculating the insurance premium.
Generally, a higher interest rate allows insurers to generate higher investment income, which allows them to reduce the premiums charged to customers. On the other hand, for two or three years, interest rates have been low, and several insurance companies have had to raise insurance prices.
