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I don't understand why investors would induce people to buy life insurance policies that they sell to investors (who pay the premium and eventually get the deat
by Bostonian 2y ago
I don't understand why investors would induce people to buy life insurance policies that they sell to investors (who pay the premium and eventually get the death benefit) unless life insurance is underpriced. Why would insurance companies underprice their policies?
- mistrial9 2y agoI do not understand this setup after reading one time.. Is it possible that by law, the Insurance industry has to price based on median life span.. but that certain demographics are very likely to live longer, therefore making some small chance for arbitrage ?
- LorenPechtel 2y agoIt's not that it's underpriced, it's that it's subsidized. Specifically, by the fact that the payout is tax free. This means that fairly priced life insurance is worthwhile if your transaction costs are low enough. This leads to periodic headlines from when somebody discovers the "secret" that many large companies buy life insurance on their employees. Some "expose" about how that shows they cut corners on safety. Nope, it's just they can buy it on a large enough scale to make it worthwhile.
- redeeman 2y agowords matter. That the state does not steal from it does not make it subsidized, it makes it unplundered (or intact, or possibly other words)
- colonCapitalDee 2y agoIt could be because the value of the policy changes due to changing circumstances, like switching career fields to a less dangerous job or getting a favorable medical diagnosis. Or regulatory arbitrage, perhaps Apollo can price life insurance policies more accurately because they don't have to comply with the same regulations insurance companies do.