A Guide To Life Insurance - Premium Rates Continued ....


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Premium Rates Continued...

Though companies use similar mortality tables and assume broadly similar rates of interest, premium rates do vary considerably.

These differences arise as a result of several factors.

One is the actual mortality experience of the companies themselves; a company that has suffered lower claims will have acquired larger reserves and be able to quote lower rates.

Another is the type of policyholders a company already has: if too many of these fall into one age group it may wish to set its premium rates to attract those from other age groups into becoming policyholders in order to avoid a "bulge" in claims at some date.

Yet another factor is the variations in expenses that different companies have to bear. These comprise not only staff, rent and rates but the costs of selling new policies and of servicing existing ones.

Thus, one company may have invested substantially in sophisticated computer equipment which cuts down the cost of records and policy handling, while another may still be struggling with more expensive old-fashioned methods.

One may carefully monitor the performance of its sales and marketing personnel to make sure they all earn their keep in generating new business, while another may adopt a more casual and less cost-conscious approach.

One may be expanding rapidly and incurring high initial costs on selling new policies, while another may be selling few policies and thus incurring low sales costs.

Such differences mean that life offices have different "expense ratios" - the proportion of the office's total income required for expenses is higher or lower. For the policyholder, in the long run, the lower the ratio the better.

None of these factors is static, and since competition is always active the pattern of premium rates quoted by life insurance companies is continually subject to change.

An Online Guide To Life Insurance - Read ....

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The successful management of a life insurance company is not a simple undertaking, since all the factors mentioned above interrelate. Consider what might happen if a particularly misguided company were to cease requiring medical examinations for people of middle age taking out substantial whole-life policies (where premiums are payable throughout life).
All over the country, professional advisers faced with overweight clients in sedentary jobs with general poor health would quickly steer........ see: click here for Bonus Systems


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