The Affects of Longer Lifespans on the Insurance Industry
Although we rank well behind the other wealthy industrialized nations of the world in terms of overall lifespan, Americans are still living longer these days. This increased lifespan is having a noticeable affect on the insurance industry.
Insurance companies hire trained professionals called actuaries that develop complex mathematical equations to determine how much to charge for premiums. It basically boils down to them trying to figure out how long people will live.
For regular life insurers the longer you live, the better it is for them. They receive premiums for a longer period of time and are able to invest the capital allocated to your pay out for a longer period of time. So, it’s a win/win situation, you’re both happy when you have a long fruitful life.
However, cases may arise where you may need to cash in your policy before you die. This is where life settlement companies come in. They will give you a sum of money to take over your policy, pay for the premiums and become the beneficiary. In this case though, the longer you live, the worse it is for them.
“investors realize some life expectancies are not maturing as projected, but no one is sure yet how it will impact financially.”
“major flaws with the system and fears the industry could collapse like the subprime mortgage market.”
It’s kind of morbid when you think about it, that a company’s financial success is determined by how quickly you die. They do provide a useful benefit to people though. For whatever reason you no longer wanted your life insurance policy, it would be unfortunate if you were to receive nothing back after making years of payments.
