Here’s Why Life Insurance Prices Hit a Monumental 20 Year Low

Here's Why Life Insurance Prices Hit
a Monumental 20-Year Low

There are many reasons why insurance policies are cheaper today. People are living longer. Stocks have a higher value which is increasing profit margins. The cost to do business has decreased. Technology has produced breakthroughs in medicine that has led to earlier detection and risk factors. Fewer people also engage in social behaviors that are detrimental to health and life expectancy. Here’s why life insurance prices hit a monumental 20-year low.
1. Mortality rates are higher today
In 1998, there were 2,337,256 deaths in the United States, and according to the CDC, the life expectancy was 76.7 years. Today, the death rate is 2,712,630, and the life expectancy increased to 78.8 years of age. Why is this data important?

It shows that since carriers are only paying out about one percent of policies, people are out-living the terms. It has led people to invest strategically in options like universal insurance plans which focus equally on retirement and death benefits.

Insurance providers use mortality rates to determine life expectancy. This data helps insurance agents establish the probability of payout as well as the amount they would have to pay in death benefits. Insurance carriers bet on risk and intend on making gains.

It turns out that people have been good at using mortality, math, and health histories. Today, technology can narrow death down even more accurately than ever before which means profit margins and premiums are leading to better underwriting of policies. Companies are paying less in benefits which have lowered the cost of insurance plans.

Medicine has dramatically improved mortality rates over the last twenty years. In the 1980s, AIDS was a death sentence as the life-expectancy was just 12 years after infection. Today, the life expectancy is 43 years because of anti-retroviral therapy.

Twenty years ago, a medical condition would disqualify a person from getting life insurance. Even if approved, the high expense of premiums chewed away at any death benefits. Now, policies and coverage options have expanded and are now affordable.
2. Stock investments are at an all-time high
Stocks play a critical role in insurance premiums since the companies invest them to ensure they make more profit than losses. The primary way to do it is with stocks and bonds. When the market does well, insurance companies make more money.

In 1998, the average for Dow was 9,181. The next year, it rose to over 11,000 which is an example of how the market tends to fluctuate. Today, the Dow is 25,090, Nasdaq is 7,746, and the S & P is 2,779. Since stocks grow wealth, people are paying less for premiums while also sharing in the rewards because of their strategic investments.

If you invested in a stock-friendly policy with cash value twenty years ago, you would have built up a very lucrative investment portfolio that would enable you to use your cash portions to pay for premiums as well as provide for a well-cushioned retirement fund.

Insurance companies also rely on interest rates to determine profit. As interest fluctuates, it can affect an insurance company’s day-to-day operations since insurance products tie in with stocks and bonds. Profitability is a combination of liability and assets. Lower rates decrease liability and policyholder obligations. Higher rates increase assets and profit.
3. Company expenditures have changed due to technology
Companies today have fewer overhead costs. Although leases, employee salaries, and full-time benefits increase rates overall, companies are making changes to the number of staff in-house. When companies reduce expenses, it decreases policy costs.

Today, computers are doing many of the jobs that insurance agents used to do. It is also quite common for insurance companies to outsource back-office operations to decrease further business costs that increase profit margins.

Outsourced tasks include:

  • Claims and Processing
  • Management
  • Administrative Tasks
  • Accounting
  • Data Processing
Outsourcing also provides more time for staff to achieve more complex issues that are time-sensitive. It also lets teams focus on core business functions that promote growth and profit strategies that further help to reduce premiums.

Outsourcing call center duties will reduce employee-related costs significantly since companies have access to multiple skill sets including sales, appointment setters, and technical support. They also work 24/7/365 which enhances growth potential.
4. There are more insurers now than ever before
According to the Insurance Information Institute, at the start of 2017, there were 5,977 insurance companies in the United States including 872 life and 2,538 property and casualty companies. About 53% of those insured chose to purchase life insurance.

Insurance companies understand how competition among thousands of companies affects rates. They want to offer prices that attract consumers. Shopping around and researching policies will significantly improve your chances of receiving a lower rate.
5. Fewer people smoke today than before
While smoking is the number one cause of preventable death and disease, it is on the decline more now than ever before. In 1998, 24.1% of adults, or 47.2 million, were regular smokers. About 44.8 million people had quit smoking either in or before 1997.

In 2005, 20.9% of Americans smoked. By 2016, the rate had fallen to 15.5% which shows a trend toward non-smoking behaviors. It also shows a decline of smokers to around 37.8 million adults which have increased the likelihood of lower future smokers.

Even though more than 16 million Americans have smoke-related diseases today, the overall health of Americans is better now than ever before. As fewer people choose to smoke, the cost of policies will continue to decrease.
You should buy insurance when you think you need it. That said, the lower insurance premiums will help you begin to build a portfolio that not only protects your family from financial ruin but also enables you to create a sound investment portfolio with high stock values.

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