Podcast Center
Video Center
Webcasts
Resource Center
Events
July 14, 2002 at 08:00 PM
When asked to produce an important document, W. C. Fields, in the movie The Man on the Flying Trapeze, approaches an enormous rolltop desk, pushes back the top, and, with a sly grin, extracts the document out of a huge pile of crumpled paper.
Alas, when life underwriters seek information to match the right underwriting class with the best plan type, the problem is not so easily solved. Whats needed is a way of systematically categorizing risk within its context and continuity. Only then can underwriters make proper judgments.
In terms of that W. C. Fields movie, insurers need to clear away the disorganized pile of paper to reveal the pigeonholes in that rolltop desk. To create a reasonable measure of context for insured cases, they need to label the columns by underwriting class and the rows by product type, and then fit various mortality risks into this two-dimensional model. Insurers might add a third dimension, tooa continuity element, say, such as time or history.
Furthermore, as new product types emerge and the business changes, insurers need to refine things further.
This begs the question: Since the life insurance marketplace has undergone significant change in the past year or so, what refinements do product developers need to plan for now? Well look at that in a moment. First, lets review this history.
In the not too distant past, term, permanent and traditional products (like paid-up life or family policies) required relatively limited underwriting classes. The average policy size was small, and the policy featurescompared to todays policieswere fairly simple. For companies offering nonsmoker/smoker products, a flat nonsmoker discount seemed like a good idea. Also, female rates were determined using an age adjusting setback of some years. This simplified conservatism provided ample cushion, and for a time customers were content.
But, with the advent of interest-sensitive and universal life plans, product developers traded in some of that conservatism for growth. Distinctions like smoking status and the first real preferred classes made it essential that companies have competitive products. As a result, consumers could now afford larger face amounts. Suddenly, the life insurance industry found itself competing harder, offering more bells and whistles and more protection, and also vying with stocks and mutual funds, whose fortunes were on the upswing.
That was a sea change. Insurers started emphasizing the investment aspect of their plans, and downplaying the death benefits.
