Changes
* Height and Weight for men and women is taken as the median height and weight prevailing in USA.
* Coverage Amount is based on the median annual household income of USA taken as $50,000 and Term duration is assumed as 15 years.
==Overview of Life Insurance==
===Introduction===
* Life Insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness.
* Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.
''Source: http://en.wikipedia.org/wiki/Life_insurance''
===Why should people go for Life Insurance Policy===
* To make sure their family will be well taken care of if they die.
Companies call these segments as rating classes. Different companies give different weights to different diseases and they have their own health check list while developing these rating classes. All people in a rating class do not have the same life span but, they have a fairly predictable life expectancy. This give companies a basis to determine premiums.
==Sensitivity Analysis==
* The variation in premium charged among men and women is from '''24% to 51%'''.
* It is worth noticing that while premium charges for AIG increases by '''67%''' from Best to Standard class, the increase for Prudential is only '''62%'''.
* '''''This indicates that AIG is more sensitive to health class than Prudential among Non-Smokers. However, Prudential may be termed as more risk-averse than the other insurance companies as the premium charged is maximum in all health classes.'''''.<br>
===Premium charged by different insurance companies for “Smokers – having less than 1 pack a day” in different health classes===
[[Image:LESS THAN 1.jpg|center|600px]]
* TransAmerica Transamerica charges the least premium in all health classes except for Standard Plus health class in which Prudential charges least for men and in Standard health class in which AIG charges least for women.
* '''''For men, as the health class shifts from Best to Standard, the variation in premiums for companies become less.''''' The percentage variation between the minimum and maximum premium in '''Best health class is 28%''' while it is only '''15% in Standard health class'''.
* However, the same for women is 17% in Best health class and 32% in Standard health class.
* TransAmericaTransamerica, the least premium charger increases its premium by 30% from Best to Standard health class while the highest premium charger Genworth has a increase of only 16% for the same. This may indicate that the '''risk appetite for Genworth is less'''.
* The maximum difference between the premium charged for '''men is 49%''' while for '''women is as high as 77%'''. This indicates that as the health category of women goes down the proportionate increase in premium is more than in case of men. So we can say insurance companies are '''more sensitive to the changes in health condition of women'''.<br>
* TransAmerica Transamerica charges the least premium in all health classes except for Standard Plus health class in which Prudential charges the least and in Standard health class in which AIG charges the least for women.
* ING seem to be very risk averse in this category for men as the premium charges for all health classes is among the highest at $413 ( except for Standard Class in which Prudential charges a monthly premium of $414 ).
* For women the highest premium chargers vary as follows:
* In this category too, maximum difference between the premium charged for men is 49% while for women is as high as 77%.<br>
* Prudential charges the least premium in all health classes. Genworth charges the maximum for men while ING charges the maximum for women in the Best and Preferred class while maximum premium charges for women in Standard Plus and Standard health class are same for three companies – TransAmericaTransamerica, ING and Genworth.
* In the Standard Plus health class, all insurance companies except Prudential appears risk averse as their premium is on average 153% more than Prudential’s for men ($155). For women, the average premium charged is as high as 162% more than Prudential’s ($109).
* This difference seems to converge a little as we inspect the premium charges in the Standard health class which is on an average only 101% and 102% for men and women, respectively.<br>
* The graphs presented below depict the premium charges of the respective insurance company for different health classes and sub-categories based on smoking habits.
* It is noteworthy that although the companies charges less premium for women than men, but the increase in premium as the health class shifts, is higher for women than men. This is an indicative that the companies maintain a policy of risk averseness for women as their health class goes down.<br>
===Pruco Life Insurance Co . (Prudential)===
[[Image:prudential.jpg|center|600px]]
* '''''For Standard Plus and Standard health class, the premium charges for Non-smokers and Nicotine patch users are same. This indicates that the company may be treating these two segments as one or at par with each other.'''''
* From the graph we find that as the health class of the Non-smoker moves from Best/Preferred health class to Standard, the premium charged increases by 29% for men and 35% for women in Standard Plus and by 62% for men and 75% for women in Standard health class. This shows that the '''''sensitivity of the company increases with the decrease in health condition and they are more sensitive to Standard health segment'''''.
* One interesting thing to note is that the company charges the same premium for both men and women who smoke for the health classes – Best, Preferred and Standard Plus. However the premium increases by 22% ( < 1 pack of cigarette ) and 25% ( > 1 pack of cigarette ) for men while for women it increases by 51% and 30%.* '''''The highest rate differential is found in the Best and Preferred segments where the average rates between Non-smokers and Smokers (excluding nicotine patch users) differ by 181%'''''.<br>
===Reliastar Life Insurance company (ING)===
[[Image:ING.jpg|center|600px]]
* '''''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 209%'''''.<br>
===American General Life company (AIG)===
[[Image:aig.jpg|center|600px]]
'''''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%'''''.<br>
* '''''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 229%'''''.<br>
===Average variation of premium for Non-Smokers across Health Classes compared to premium charged in Best Health Class===
[[Image:NS combined.jpg|center|600px]]
