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8 thoughts on “Group Life Insurance: Free falling premium rates – sales desperation or professional judgement?

  1. Even though I completely agree with your thoughts, even reinsurers for that matter lower their rates for the same group with different insurers. Even though you might not agree on this fact since it is market news, it is a reality. What if there ae no claims on the first anniversary and still we give the same rates. I disagree to the fact that sales team try to negotiate. In few cases, we have got better rates than the rare given by actuaries and still the account was bleeding. As an Insurance company one needs to look at the total risk size for profitability rather than individual cases. I would definitely like to hear from you on my argument.

    1. Agree with most of your views. Of course, sales teams negotiate. But I don’t find fault with them. They are doing their job. I am challenging life insurers about their pricing approach which changes from one quote to another. Completely agree with you that the quote should be based on portfolio experience. As I wrote, whatever is the approach, it can’t change for the next quote.

  2. Good article Sai Garu..

    Change Price is driven by competition and changes in company’s views on risks, profit load & expense load.

    Insurers’ actuaries may not change their view on risk for a scheme but the CEOs and Sales Heads may change their views on how much profit or expense loads they may wish to forgo to get top line and win the policy. This is their target and they are paid for that.

    For a given quote as long as actuaries assess the risk rightly for first time and are strong enough to justify the risk cost(core component of price) & don’t change it, it is okey. Unless we get additional data on the group, the risk cost should not change from actuarial perspective.

    The other points relating to GTL which are more concerning and more of risk management where actuary’s role is must are shared below.

    Actuaries have differences of opinion here also!!

    -Offer death covers beyond retirement age(65) under GTL. This is definitely against our life stage and need analysis. Its only the Sr Officials ( directors and chairman)who take the low price advantage and seek covers until 80. They actually dont need a cover at all under GTL. If they feel they need, they can go for individual policy rather GTL. They dont go for individual because of FCLs and low price and no long term premium commitment.

    Other point is offering high covers at high ages under GTL. The need for life insurance reduces with age which should be reflected in GTL covers rather offering flat max of 10 times CTC to all lives. If some one needs high SA at high age, let him go for UW and take individual cover rather getting in to group.

    1. Agree. Especially the last point. The reduced need for insurance cover should be reflected. In practice, it’s happening the other way round. Seniors with higher age are getting maximum cover

  3. Great article Sai garu. Pricing of group term cover has always been topic of debate.
    To understand the basic fabric of this busoness,we need to ask basic questions.
    1. Whether insurer is getting a complete and accurate data? Specially claims data. Who provides data. Whether any responsibility is attached for the data provider?
    2. What is the company’s pricing philosophy for this type of business? Whether the same is documented and followed holistically?
    3. Whom to blame if company looses the deal after sharing the pricing quote or whom to blame if actual portfolio bleeds after winning the deal- Actuary, head of group business, CEO, head of risk???
    Regulator had been observing all the drama for years and thankfully they have come up with exhaustive group guidelines where there is no scope for any discretion.
    Now regulator is keenly watching on the price wars and if the insurer crosses the boundary of the playing field then obviously it will be taken seriously.
    Hopefully all the insurers are storing the pricing models and justification document for each client for verification purpose.
    Smart insurer would prefer not to get business rather loosing money from the business.

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