Article Title

Life Insurance Prices


Life insurance textbooks refer only briefly to the subject of price competition, and even some of these references contain statements that are inconsistent in certain respects. On the one hand, in discussions of regulation, the statement is sometimes made that life insurance rates generally are not regulated and that competition is felt to be a sufficient protection against excessive rates. On the other hand, in discussions of differences among insurance carriers, the statement is sometimes made that price comparisons in life insurance are sufficiently complex to be well beyond comprehension for the layman. Taken together, such statements raise an important question: is it possible to have effective price competition when the problem of price analysis is as complicated as it is in life insurance? The purpose of this paper is to examine this question through the analysis of some life insurance price data. The article is organized in six parts. Following the introduction are discussions of price measurement in life insurance, the manner in which the rate of return on the savings element in cash-value life insurance may be calculated, the relationship between benefits and premiums, the variation in price among companies for essentially the same coverage, and the author's conclusions.