Life Insurance Industry in US

Contents

Objective

Methodology

The analysis was divided in three parts:


Methods.jpg


Overview of Life Insurance
A basic understanding of the life insurance industry was developed through secondary resources like websites, journals etc. This answered question like what is life insurance, why people go for it, what various types of life insurance are available and how segmentation is done in the life insurance industry. The Term Life Insurance was analyzed in detail because people over 60 years of age, the focus area for this study, generally opt for this insurance type.


Premium Calculation using online Premium Calculator
The premium charged by the following life insurance companies were determined using online premium calculators:



The analysis was carried out both for men and women. The test cases were chosen with the following attributes:

Source: http://intelliquote.com


Ratings of the life insurance companies considered



Sensitivity Analysis
The sensetivity analysis was used to understand the companies' response to different health conditions on the basis of the variation in the premium amount. To enable this, the key health parameters were also determined since they have a major impact on the premium charged.

Assumptions

Source: http://quickfacts.census.gov/qfd/states/00000.html

Overview of Life Insurance

Introduction

Source: http://en.wikipedia.org/wiki/Life_insurance

Why people go for life insurance

Source:http://publishmyself.net/home-and-family/seniors-and-elder-care/do-retired-people-seniors-still-need-life-insurance/

Types of Life Insurance

Broadly, life insurance is classified as temporary life insurance and permanent life insurance. These can be further sub-classified. Various life insurance policies prevailing in United States are:


Depending on the requirements of the individuals, companies give them an option whereby they can convert their temporary insurance policies to permanent insurance policies.

Term Life Insurance

Term life insurance provides death benefit coverage with a guaranteed level premium for a specific period of time - usually 10, 15, 20 or 30 years depending upon which product chosen.

Term life insurance can help one?s family pay for necessary expenses if one dies unexpectedly. The death benefit can help the family maintain their lifestyle, cover children?s college tuition or pay off a mortgage.


Benefits of Term Life Insurance:

Segmentation in the life insurance industry

Segmentation in the life insurance industry is done on the basis of:



Companies refer to these segments as 'rating classes'. Different companies give different weights to diseases and they have their own health check-list while developing these rating classes. All the people in a rating class would not have the same life span but they have a fairly predictable life expectancy. This gives companies a basis to determine the premium amount.

Sensitivity Analysis

For the purpose of comparison, the following classification for health classes has been defined:


Health Class.jpg


Each of the health classes stated above has been further categorized on the basis of smoking habits of an individual.


Smoker.jpg


Premium charged for ?Non-Smokers? in different health classes

Non smoker.jpg



Premium charged for ?Smokers ? less than 1 pack a day? in different health classes

LESS THAN 1.jpg



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Premium charged for ?Smokers ? more than 1 pack a day? in different health classes

More than 1.jpg



Higher premium charges.jpg


Premium charged for ?Nicotine patch users? in different health classes

Nocotine patch.jpg


Company Analysis


Pruco Life Insurance Co. (Prudential)

Prudential.jpg


However, the variation in premium charged for smokers is as follows:


Prudential-premium.jpg



Reliastar Life Insurance Company (ING)

ING.jpg



Transamerica Life Insurance Co.

Transamerica.jpg


American General Life Company (AIG)

Aig.jpg


The highest rate differential is found in the Best and Preferred segments where the average rates between non-smokers and smokers differ by as much as 203%.


Genworth Life Insurance Company (Genworth Financial)

Genworth.jpg



Average variation of premium for non-smokers across health classes compared to premium charged for the Best Health Class

New.jpg

Average variation of premium for smokers across health classes compared to premium charged for the Health Class

New2.jpg

Points to note


Constraints

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