Jerry,

I am replying to a few of your posts in this one answer. I tried
not to take any thing out of context but you never know, maybe I
did. My post is sacarstic and is intended to demolish your
assumptions. Please do not view it as a personal attack directed
at yourself. I agreed with you on other subjects in the past and
it is likely I will do so again in the not so distant futue.

Daniel

> My term life insurance policy just cycled it's 15 year term.
> It cost me $53/month for $250,000. The new policy will cost me
> $250/month for the same insurance.
>
What is your point? Your new age group does not have the same
mortality experience as the age group you belonged to 15 years
ago.


> You couldn't say 'get lost' any clearer than that.
>
No, they are saying if you want to transfer your risk to us, this
is how much it will cost you. It is for you to decide whether
you want to assume the risk yourself based on your utility
function.


> Amoritization tables are supposed to be used vertically, not
> horizontally, as life and health insurance companies are now
> doing. Pure greed. Nothing else. Instead of amortorizing loss
> across all age groups (vertical) they do it within age groups.
>
Why the hell should they amortize loss across all age groups? The
utility function of a 20 year old is different from the utility
function of a 50 year old. The price of an insurance policy is far
more complicated than just applying a load factor to the expected
loss.

By the way, I may have a serious problem with you still wanting the
same insurable amount ($250,000). It is possible you knew you would
require the same insurable amount 15 years ago and decided to buy the
shorther term policy because it was cheaper. If that was the case,
you bought the cheaper product because you were greedy. There are
other reasons why you may choose the same insurable amount, some of
which I would agree with, others I would not.

BTW, financial planning is more than just purchasing life insurance.


> So, the 20-30 year olds get the best rates, but they are also
> the source of the greatest profits because they have fewer deaths
> and illnesses.
>
This is a gratuitous statement. Yes, they do pay less because their
mortality and morbidity experience is better than the one of the
group you belong to. No, they are not necessarily the source of
the greatest profits because some insurance companies actively
pursue these customers and give them a lower load factor than usual
in order to attract these customers while they are young. Some of
the rational has to do with the tendency some people have to renew
their policies with the same company instead of looking somewhere
else.



> ... the 60-70 year olds are lucky if they can afford insurance at
> all. I was able to get a new life insurance policy at $73/month for
> $100,000 on a twenty year term, but only because I purchased it while
> my previous insurance was in force.
>
IMO, it would be better if the 60-70 year olds had done their financial
planning correctly and wouldn't require insurance. The mortality rate
these groups is high enough that any substantial insurable amount will
cost you dearly.


> Not so cool when you realize that the 'risks' are NOT computed based
> on accepted life tables. Tell me, if you will, how the passing of one
> year, from 60 to 61, can justify a 5X increase in life insurance rates,
> especially since my 'life expectancy' rose from 82.81 to 82.99.
>
The 5X increase cannot be justified other than bad ratemaking practices
by the insurance company you investigated. You should investigate other
other companies because not all companies specialize in the same type of
product.

I don't understand your life expenctancy remark. Yes, your life
expectancy rose from 82.81 to 82.99 but your expected remaining life
expectancy decreased 0.82 (you already lived one year of the longer life
expectancy). It plays a factor in the price of the policy but the quote
you received is just out of this of this worls.


> You seem to have overlooked my major point, attempted to bury it with
> 'free maret/profits' jargon: Instead of spreading 'risk' through all
> age groups, as they used to to do.
>
Insurance companies used to spread the risk through all age groups
because they didn't have computers to calculate rates. The rates are a
lot more fair than they use to. The fact that you belong to the group
who used to pay a cheaper rate than they should have is not relevant to
the central fairness issue.


> ... and which was the original purpose for insurance so that more
> people than just the wealthy could benefit,
>
The original purpose of insurance was and remains the possibility for
an individual to transfer his personnal risk to a larger "population".
Insurance was not created with a social goal in mind, it was created
to allow individuals to purchase goods, fund sea voyages, etc.. that
they would not otherwise purchase/fund if the risk was entirely their
sole responsibility.

> ..life insurance companies now attempt to maximize profits by grouping
> folks by age and/or affirmity, except in the case of company-wide
> policies. They then raise the rates on selected groups, based on
> health/life records within that group, forcing members of the group to
> drop out and adding to the roles of those who can no longer afford
> insurance. This practice is based purely on greed.
>
Life insurance is a competitive market. Most companies specialize in
some age markets and you have to shop around to find the best prices.
Any insurance company will assume any risk if you are willing to pay
its price, you just have to find the company who actively pursue your
risk.

Daniel Rouleau
ASA (1991-2001)
M.Sc. (Actuarial Sciences)
M.Sc. (Mathematics)