Life Insurance Industry in US - Revision history

Manikandan: /* Constraints */

2009-08-06T06:52:26Z

‎Constraints

Manikandan: /* Premium charged for “Smokers – more than 1 pack a day” in different health classes */

2009-08-06T06:52:11Z

‎Premium charged for “Smokers – more than 1 pack a day” in different health classes

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

2009-06-04T19:08:47Z

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

Ankitbiyani: /* Average variation of premium for smokers across health classes compared to premium charged for the Health Class */

2009-06-04T19:07:26Z

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

Ankitbiyani at 21:52, 3 June 2009

2009-06-03T21:52:57Z

Ankitbiyani at 21:19, 3 June 2009

2009-06-03T21:19:28Z

Ankitbiyani at 20:51, 3 June 2009

2009-06-03T20:51:34Z

Ankitbiyani: /* Company Analysis */

2009-06-03T20:43:00Z

‎Company Analysis

Ankitbiyani: /* Company Analysis */

2009-06-03T20:38:59Z

‎Company Analysis

Ankitbiyani: /* Sensitivity Analysis */

2009-06-03T20:19:39Z

‎Sensitivity Analysis

← Older revision		Revision as of 06:52, 6 August 2009
Line 270:		Line 270:
	* This study incorporates only five insurance companies because of the constraint of data availability.		* This study incorporates only five insurance companies because of the constraint of data availability.
	* The study is limited only to the state of California; however, it was observed that the premium charges in other states were similar to those in California.		* The study is limited only to the state of California; however, it was observed that the premium charges in other states were similar to those in California.
		+
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@@ Line 135: / Line 135: @@
 ===Premium charged for “Smokers – more than 1 pack a day” in different health classes===
@@ Line 151: / Line 171: @@
 * In this category too, maximum difference between the premium charged for men is 49% while that for women is as high as 77%.<br>
 ===Premium charged for “Nicotine patch users” in different health classes===

@@ Line 229: / Line 229: @@
-[[Image:NS combined.jpg|center|600px]]
+[[Image:new.jpg|center|600px]]
-−
 ===Average variation of premium for smokers across health classes compared to premium charged for the Health Class===

@@ Line 235: / Line 235: @@
-[[Image:S combined.jpg|center|600px]]
+[[Image:new2.jpg|center|600px]]
-−
 * In AIG, monthly premium for men who smoke more than 1 pack of cigarettes a day remains constant at $413 in all health classes.
 * In AIG, monthly premium for women who smoke more than 1 pack of cigarettes a day in the Best health class is $219 which increases by 34% to $294 for all other health classes.<br>
 ==Points to note==

@@ Line 11: / Line 11: @@
 '''Overview of Life Insurance'''<br>
-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.<br>
+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.<br>
@@ Line 18: / Line 18: @@
-:* [http://www.transamerica.com '''Transamerica Life Insurance company''']
+:* [http://www.transamerica.com '''Transamerica Life Insurance Company''']
-:* [http://www.aig.com '''American General Life company (AIGAG)''']
+:* [http://www.aig.com '''American General Life Company (AIGAG)''']
-:* [http://www.prudential.com/ '''Prudential Financial (Pruco life insurance company)''']
+:* [http://www.prudential.com/ '''Prudential Financial (Pruco Life Insurance Company)''']
-:* [http://www.genworth.com '''Genworth Financial (Genworth life insurance company)''']
+:* [http://www.genworth.com '''Genworth Financial (Genworth Life Insurance Company)''']
 :* [http://www.ing-usa.com/ '''(ING) Reliastar Life Insurance company''']
@@ Line 33: / Line 33: @@
-'''Ratings of the Life Insurance companies considered'''
+'''Ratings of the life insurance companies considered'''
@@ Line 40: / Line 40: @@
 '''Sensitivity Analysis'''<br>
-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.
+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==
@@ Line 57: / Line 57: @@
 ''Source: http://en.wikipedia.org/wiki/Life_insurance''
-===Why people go for Life Insurance===
+===Why people go for life insurance===
 * To make sure their family will be well taken care of if they die.
 * To minimize tax burden and to ensure whatever they have earned goes to their heirs since it is a tax free way to transfer their wealth.
@@ Line 66: / Line 66: @@
 ===Types of Life Insurance===
-Broadly, Life Insurance is divided into Temporary Life Insurance and Permanent Life Insurance. These can be further sub-classified. Various life insurance policies prevailing in United States are:
+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:
 [[Image:types.jpg|thumb|center|600px|[http://www.metlife.com/individual/insurance/life-insurance/index.html#overview Source: metlife.com]]]
@@ Line 79: / Line 79: @@
-'''Benefits of term life insurance:'''
+'''Benefits of Term Life Insurance:'''
 [[Image:benefits.jpg|thumb|center|500px|[http://www.genworth.com/content/products/lifeinsurance/term_life_insurance.html source: genworth.com]]]
-===Segmentation in Life Insurance===
+===Segmentation in the life insurance industry===
-Segmentation in Life Insurance industry is done on the basis of:
+Segmentation in the life insurance industry is done on the basis of:
@@ Line 90: / Line 90: @@
-Companies call these segments rating classes. Different companies give different weights to different diseases and they have their own health check-list while developing these rating classes. All the people in a rating class do not have the same life span but they have a fairly predictable life expectancy. This gives companies a basis to determine the premiums.
+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==
@@ Line 100: / Line 100: @@
-Each of these health classes stated above has been further categorized on the basis of smoking habits of an individual as follows:
+Each of the health classes stated above has been further categorized on the basis of smoking habits of an individual.
@@ Line 107: / Line 107: @@
 ===Premium charged for “Non-Smokers” in different health classes===
@@ Line 121: / Line 122: @@
 ===Premium charged for “Smokers – less than 1 pack a day” in different health classes===
@@ Line 134: / Line 136: @@
 ===Premium charged for “Smokers – more than 1 pack a day” in different health classes===
@@ Line 141: / Line 144: @@
 * Transamerica charges the least premium in all health classes except for the 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 the Standard Class in which Prudential charges a monthly premium of $414 ).
-* For women the highest premium chargers vary as follows:
+* For women, different companies charge the highest premium for different health classes:
@@ Line 241: / Line 244: @@
 ==Points to note==
-* The first level of segmentation in Life Insurance industry is on the basis of Age and Gender. Then they are further segmented on the basis of their health class and thereafter on the basis of their smoking habits.
+* It is noteworthy that although the companies charge lesser premium for women than for men, the increase in premium as the health class shifts is higher for women than men. This is an indication that the companies maintain a policy of high risk averseness for women as their health class goes down.
-* It is noteworthy that although the companies charge less premium for women than men, the increase in premium as the health class shifts is higher for women than men. This is an indication that the companies maintain a policy of high risk averseness for women as their health class goes down.
 * Companies consider Best and Preferred health class customers in the same segment as the premium charged is same for both these classes.
 * Transamerica charges low premium across all categories of health classes. So we can say that they are trying to tap the major chunk of the market by competitive pricing strategy.
@@ Line 251: / Line 253: @@
 ==Constraints==
 * This study incorporates only five insurance companies because of the constraint of data availability.
-* The study is limited only to the state of California; however, we observed that the premium charges in other states are similar to that of California.
+* The study is limited only to the state of California; however, it was observed that the premium charges in other states were similar to those in California.

@@ Line 1: / Line 1: @@
 ==Objective==
-* To perform sensitivity analysis and qualitatively determine the variation in monthly premium charged by the life insurance companies.
+* To perform sensitivity analysis and quantitatively determine the variation in the monthly premium charged by various life insurance companies.
-* To understand Life Insurance companies' behavior towards different segments, which are based on gender and health groups.
+* To understand life insurance companies' behavior towards different segments, which are based on gender and health groups.
 ==Methodology==
-We have divided our analysis broadly into 3 parts:
+The analysis was divided in three parts:
@@ Line 11: / Line 11: @@
 '''Overview of Life Insurance'''<br>
-We first studied the basics of Life Insurance through secondary resources like websites on the internet, journals etc. as to understand what is life insurance, why people should go for it, various types of life insurance and how segmentation is done in the Life Insurance industry. We covered the Term Life Insurance in detaile because people over 60 years of age, which was our focus area in this study, generally opt for this insurance.<br>
+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.<br>
 '''Premium Calculation using online Premium Calculator'''<br>
-We determined the premium charged by the following life insurance companies using online premium calculators:
+The premium charged by the following life insurance companies were determined using online premium calculators:
@@ Line 25: / Line 25: @@
-We considered cases for both men and women.
+The analysis was carried out both for men and women. The test cases were chosen with the following attributes:
 :* For men height and weight assigned were 5’8’’ and 176 lbs respectively while for women height and weight assigned were 5’4’’ and 162 lbs respectively.
-:* Date of Birth was taken as 3rd March, 1949 (more than 60 yrs), coverage amount as $250,000, the guaranteed term as 15 years and state as California both for male and female.
+:* Date of Birth as 3rd March, 1949 (more than 60 yrs), coverage amount as $250,000, the guaranteed term as 15 years and state as California both for male and female.
 :* Premiums were calculated considering various health conditions as blood pressure, cholesterol, cardiac problems or cancer in the family, medical advice or treatment for major illness etc. <br>
 ''Source: http://intelliquote.com''
@@ Line 40: / Line 40: @@
 '''Sensitivity Analysis'''<br>
-Finally we analyzed the companies' response to different health conditions on the basis of the variation in the premium amount. From this we also determined the key health parameters which have major impact on the premium charged.
+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==
-* Height and weight for both men and women considered are the median height and weight prevailing in USA.
+* Height and weight for both men and women test cases were obtained from the median height and weight prevailing in USA.
 * Coverage amount was based on the median annual household income of USA taken as $50,000 and Term duration assumed to be 15 years.
@@ Line 57: / Line 57: @@
 ''Source: http://en.wikipedia.org/wiki/Life_insurance''
-===Why should people go for Life Insurance Policy===
+===Why people go for Life Insurance===
 * To make sure their family will be well taken care of if they die.
-* To minimize tax burden and to ensure whatever they have earned goes to their heirs as it is a tax free way to transfer their wealth.
+* To minimize tax burden and to ensure whatever they have earned goes to their heirs since it is a tax free way to transfer their wealth.
 * The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
 * Some insurance policies like Universal life insurance, whole life insurance and some term life insurance can be settled for cash value, the value that can be borrowed against or cashed in when the owner needs money.
@@ Line 66: / Line 66: @@
 ===Types of Life Insurance===
-Broadly Life Insurance is divided into Temporary Life Insurance and Permanent Life Insurance. These can be further sub classified. Various life insurance policies prevailing in United States are:
+Broadly, Life Insurance is divided into Temporary Life Insurance and Permanent Life Insurance. These can be further sub-classified. Various life insurance policies prevailing in United States are:
 [[Image:types.jpg|thumb|center|600px|[http://www.metlife.com/individual/insurance/life-insurance/index.html#overview Source: metlife.com]]]
@@ Line 238: / Line 238: @@
 * In AIG, monthly premium for women who smoke more than 1 pack of cigarettes a day in the Best health class is $219 which increases by 34% to $294 for all other health classes.<br>
-==Key Findings==
 * The first level of segmentation in Life Insurance industry is on the basis of Age and Gender. Then they are further segmented on the basis of their health class and thereafter on the basis of their smoking habits.

@@ Line 175: / Line 175: @@
 * 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 charge lesser premium for women than for men, the increase in premium as the health class shifts, is higher for women than men. This indicates that the companies maintain a policy of risk averseness for women as their health class goes down. <br>
 ===Pruco Life Insurance Co. (Prudential)===
@@ Line 191: / Line 192: @@
-* '''''For Standard Plus and Standard health class, the premiums charged for Non-smokers and Nicotine patch users are the same. This indicates that the company may be treating these two segments as one or at par with each other.'''''
+* '''''For Standard Plus and Standard health class, the premiums charged for non-smokers and nicotine patch users are the 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 deterioration in health condition and they are more sensitive to the 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% respectively.
 * '''''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)===
@@ Line 202: / Line 204: @@
-* '''''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>
+* '''''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>
 ===Transamerica Life Insurance Co.===
@@ Line 210: / Line 213: @@
-* '''The highest rate differential is found in the Standard Plus segment where the average rates between Non-smokers and Smokers differ by as much as 183%'''.<br>
+* '''The highest rate differential is found in the Standard Plus segment where the average rates between non-smokers and smokers differ by as much as 183%'''.<br>
 ===American General Life Company (AIG)===
@@ Line 218: / Line 221: @@
-'''''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 203%'''''.<br>
 ===Genworth Life Insurance Company (Genworth Financial)===

@@ Line 173: / Line 173: @@
 ==Company Analysis==
-* The graphs presented below depict the premium charges of the respective  insurance company for different health classes and sub-categories based on smoking habits.
+* 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>
+* It is noteworthy that although the companies charge lesser premium for women than for men, the increase in premium as the health class shifts, is higher for women than men. This indicates that the companies maintain a policy of risk averseness for women as their health class goes down. <br>
 ===Pruco Life Insurance Co. (Prudential)===
@@ Line 182: / Line 182: @@
-* Although Prudential charges higher premium for other categories, the charges are least for nicotine patch users.
+* Although Prudential charges higher premium for other categories, their charges are the least for nicotine patch users.
-* The premium charges for nicotine users are only '''29% higher for men''' and '''35% higher for women''' than the non-smokers in the Best and Preferred health class.
+* The premium charged for nicotine users is only '''29% higher for men''' and '''35% higher for women''' than that for non-smokers in the Best and Preferred health classes.
-However, premium variation among smokers are as follows:
+However, the variation in premium charged for smokers is as follows:
@@ Line 191: / Line 191: @@
-* '''''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.'''''
+* '''''For Standard Plus and Standard health class, the premiums charged for Non-smokers and Nicotine patch users are the 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'''''.
+* 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 deterioration in health condition and they are more sensitive to the 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%.
+* 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% respectively.
 * '''''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)===
+===Reliastar Life Insurance Company (ING)===
@@ Line 204: / Line 204: @@
 * '''''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>
-===Trnasamerica Life Insurance Co.===
+===Transamerica Life Insurance Co.===
@@ Line 212: / Line 212: @@
 * '''The highest rate differential is found in the Standard Plus segment where the average rates between Non-smokers and Smokers differ by as much as 183%'''.<br>
-===American General Life company (AIG)===
+===American General Life Company (AIG)===
@@ Line 220: / Line 220: @@
 '''''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>
-===Genworth Life Insurance company (Genworth Financial)===
+===Genworth Life Insurance Company (Genworth Financial)===
@@ Line 226: / Line 226: @@
-* '''''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>
+* '''''The highest rate differential is found in the Best and Preferred segments where the average rates between the 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===
+===Average variation of premium for non-smokers across health classes compared to premium charged for the Best Health Class===
@@ Line 235: / Line 235: @@
-===Average variation of premium for Smokers across Health Classes compared to premium charged in Best Health Class===
+===Average variation of premium for smokers across health classes compared to premium charged for the Health Class===
@@ Line 242: / Line 242: @@
 * In AIG, monthly premium for men who smoke more than 1 pack of cigarettes a day remains constant at $413 in all health classes.
-* In AIG, monthly premium for women who smoke more than 1 pack of cigarettes a day in Best health class is $219 which increases by 34% to $294 for all other health classes.<br>
+* In AIG, monthly premium for women who smoke more than 1 pack of cigarettes a day in the Best health class is $219 which increases by 34% to $294 for all other health classes.<br>
 ==Constraints==
 * This study incorporates only five insurance companies because of the constraint of data availability.
 * The study is limited only to the state of California; however, we observed that the premium charges in other states are similar to that of California.

@@ Line 116: / Line 116: @@
-===Premium charged by different insurance companies for “Non-Smokers” for different health classes===
+===Premium charged for “Non-Smokers” in different health classes===
@@ Line 130: / Line 130: @@
-===Premium charged by different insurance companies for “Smokers – less than 1 pack a day” in different health classes===
+===Premium charged for “Smokers – less than 1 pack a day” in different health classes===
@@ Line 142: / Line 142: @@
 * The maximum difference between the premium charged for '''men is 49%''' while for '''women it 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 the health conditions of women'''.<br>
-===Premium charged by different insurance companies for “Smokers – more than 1 pack a day” in different health classes===
@@ Line 159: / Line 160: @@
-===Premium charged by different insurance companies for “Nicotine patch users” in different health classes===
+===Premium charged for “Nicotine patch users” in different health classes===