8 ms·

For a single person, perhaps fortunate. What about in aggregate? What if the math is so bad that your life insurer goes bankrupt?

hiAndrewQuinn 1y ago
... I just switch life insurance providers? Seriously, that's just not that big of a deal. It takes like a few days at most for simple term life. Can't speak to the other policies, which I understand are mostly tax vehicles anyway, but it's not hard to simply get a new life insurance policy if your current one goes kaput.
- FabHK 1y ago
  ... and the question was about the aggregate effect. What happens if all life insurers go bankrupt?
  - hiAndrewQuinn 1y ago
    Every single life insurer? All at once? Jeez.... I guess in that scenario I become a billionaire because it will be very easy to scoop up some VC money to snoop up some of those newly unemployed actuaries to monopolize the market at a profit margin an order of magnitude larger than any of my now non-existent competition, because this is a financial product and doesn't require months of building a factory or something to offer.
    - ecb_penguin 1y ago
      If you think it's that simple, you have no idea what you're talking about. How many years experience do you have in the insurance industry that you're so confident to talk like this? > because this is a financial product and doesn't require months of building a factory or something to offer. How many financial instruments have you launched? If the answer is zero, you should refrain from any conversations on the topic because your opinion literally means nothing.
      - hiAndrewQuinn 1y ago
        I do actually think it's that simple, yes. Term life is just not that complicated a product at heart. Onus is on you to prove that if every single life insurance provider was suddenly Thanos snapped out of existence tomorrow, we wouldn't see a swarm of hungry financial professionals swoop right back in to recreate the service within weeks. That seems like a laughable claim to me, but maybe you know something I don't. (Edit, for future readers: ecb_penguin seems to have missed the question earlier in the thread I was responding to: >... and the question was about the aggregate effect. What happens if all life insurers go bankrupt? Emphasis mine. This was to clarify that yes, the original commenter meant literally all providers.)
        ecb_penguin 1y ago
        Ok, so you have no experience and you're just making things up. > Term life is just not that complicated a product at heart Sure, it's easy if you don't know what you're talking about and just make stuff up! > Onus is on you to prove that if every single life insurance provider was suddenly Thanos snapped out of existence tomorrow Literally nobody said that would happen. Now you're arguing points that nobody made. You have no experience in the area, arguing things nobody said. You're perfect for VC money, lmao. > That seems like a laughable claim to me Nobody made that claim. Why are you laughing at things nobody is saying? That's weird. > That seems like a laughable claim to me, but maybe you know something I don't. I would 100% guarantee people that have worked in an industry know more about it than you do. Textbook demonstration of the Dunning-Kruger effect. You have no knowledge or experience in an area, but you're confident you know how it works, moreso than the actual experts. https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
        ecb_penguin 1y ago
        "the Dunning–Kruger effect is the thesis that those who are incompetent in a given area tend to be ignorant of their incompetence, i.e., they lack the metacognitive ability to become aware of their incompetence. This definition lends itself to a simple explanation of the effect: incompetence often includes being unable to tell the difference between competence and incompetence." I think this very accurately sums up your comments.
  - carlosjobim 1y ago
    That is great, they are by definition a net negative on the economy as a whole? You shouldn't gamble on your own health.
    - _9ptr 1y ago
      Oh come on, you can't be serious. It's not a gamble, you transfer your risk to a collective.
      - eru 1y ago
        It doesn't matter whether your counterparty for your insurance is a collective or a single individual like Warren Buffett. The 'collective' part is a distraction when trying to understand insurance. Similar for insurance to work you don't need to have a group of people who are in the same situation as you: in principle an insurer can work out the risks, even if you are in a unique situation. It's just that working these things out costs time and money, so it's cheaper for you, if you are like everyone else. But eg if you are a famous singer, you can insure your voice just fine. Companies also regularly purchase insurance against customers winning prizes. See https://en.wikipedia.org/wiki/Prize_indemnity_insurance https://en.wikipedia.org/wiki/Prize_indemnity_insurance
    - eclipticplane 1y ago
      Perhaps some life insurance products fall into that category. For many families, though, term life insurance plays a big part into ensuring financial security if one income earner dies prematurely.
    - DrillShopper 1y ago
      If you want to gamble on your health then you want a tontine, not life insurance.
    - deleted 1y ago
      [deleted]
    - A_D_E_P_T 1y ago
      Life insurance, in the past, was frequently illegal. I'd argue that it should be illegal again, as a moral hazard (directly contributing to countless murders and other schemes) and as a particularly morbid form of gambling.
  - eru 1y ago
    Why would they all go bankrupt? Seems silly. Yes, some life insurance companies can make mistakes or get unlucky. after a few went bankrupt from whatever you are imagining, you'd think that the remaining companies would change their risk models or simply charge higher premiums?
- DavidPeiffer 1y ago
  You will be going through underwriting again, your new rate will be based on starting at an older age, and you'll have a new exclusion period begin (unless there are some provisions which prevent these in the event of a company failure). Hopefully you haven't had any significant health conditions present themselves since the original policy went into effect.
  - darth_avocado 1y ago
    Insurance companies will find any and every reason to not insure you. A slight change in lifestyle could mean you are no longer covered.
    - sethhochberg 1y ago
      With term life insurance specifically the lifetime policy premiums are typically so low relative to the value of the policy that there's a natural bias towards insuring generally healthy people. Its not uncommon to see policies that are something like $40/month for 20 years ($9600 in premiums) for a $1mm death benefit, for example. People with more complex medical conditions often can get life insurance from smaller, specialized providers... and at much higher rates. But the big mass-market players offering inexpensive term life products are only offering them that cheaply because they really control the risk profile during underwriting.
    - eru 1y ago
      Insurance companies only make money, when they insure people..
- Marsymars 1y ago
  That’s a pretty bad deal if you’re 10 years into a 20-year term, and your rates were determined prior to a decade of inflation and new pre-existing conditions.
  - hiAndrewQuinn 1y ago
    I admit that's unfortunate. I don't think that was a "bad deal" in the sense that anyone grievously misled you or anything. I would feel bummed out, but not angry or like I actually got ripped off, in other words. When I signed up for the 20-year term, part of what I was being asked to do was estimate how likely I think it is for this firm to actually be around for that full 20 years. That's just part of the game.
    - Marsymars 1y ago
      Maybe in some platonic ideal, but in practice a) consumers (and even brokers) aren’t that sophisticated, and b) likelyhood of the company being around in 20 years isn’t baked into the price. When I shopped for insurance there were only 3 options with contract terms that passed muster, and all three companies are large ones that I’d expect to be around in 20 years to a degree that has no relation to the price quotes I got.

hiAndrewQuinn 1y ago

... I just switch life insurance providers? Seriously, that's just not that big of a deal. It takes like a few days at most for simple term life. Can't speak to the other policies, which I understand are mostly tax vehicles anyway, but it's not hard to simply get a new life insurance policy if your current one goes kaput.

FabHK 1y ago
... and the question was about the aggregate effect. What happens if all life insurers go bankrupt?
- hiAndrewQuinn 1y ago
  Every single life insurer? All at once? Jeez.... I guess in that scenario I become a billionaire because it will be very easy to scoop up some VC money to snoop up some of those newly unemployed actuaries to monopolize the market at a profit margin an order of magnitude larger than any of my now non-existent competition, because this is a financial product and doesn't require months of building a factory or something to offer.
  - ecb_penguin 1y ago
    If you think it's that simple, you have no idea what you're talking about. How many years experience do you have in the insurance industry that you're so confident to talk like this? > because this is a financial product and doesn't require months of building a factory or something to offer. How many financial instruments have you launched? If the answer is zero, you should refrain from any conversations on the topic because your opinion literally means nothing.
    - hiAndrewQuinn 1y ago
      I do actually think it's that simple, yes. Term life is just not that complicated a product at heart. Onus is on you to prove that if every single life insurance provider was suddenly Thanos snapped out of existence tomorrow, we wouldn't see a swarm of hungry financial professionals swoop right back in to recreate the service within weeks. That seems like a laughable claim to me, but maybe you know something I don't. (Edit, for future readers: ecb_penguin seems to have missed the question earlier in the thread I was responding to: >... and the question was about the aggregate effect. What happens if all life insurers go bankrupt? Emphasis mine. This was to clarify that yes, the original commenter meant literally all providers.)
      - ecb_penguin 1y ago
        Ok, so you have no experience and you're just making things up. > Term life is just not that complicated a product at heart Sure, it's easy if you don't know what you're talking about and just make stuff up! > Onus is on you to prove that if every single life insurance provider was suddenly Thanos snapped out of existence tomorrow Literally nobody said that would happen. Now you're arguing points that nobody made. You have no experience in the area, arguing things nobody said. You're perfect for VC money, lmao. > That seems like a laughable claim to me Nobody made that claim. Why are you laughing at things nobody is saying? That's weird. > That seems like a laughable claim to me, but maybe you know something I don't. I would 100% guarantee people that have worked in an industry know more about it than you do. Textbook demonstration of the Dunning-Kruger effect. You have no knowledge or experience in an area, but you're confident you know how it works, moreso than the actual experts. https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
      - ecb_penguin 1y ago
        "the Dunning–Kruger effect is the thesis that those who are incompetent in a given area tend to be ignorant of their incompetence, i.e., they lack the metacognitive ability to become aware of their incompetence. This definition lends itself to a simple explanation of the effect: incompetence often includes being unable to tell the difference between competence and incompetence." I think this very accurately sums up your comments.
- carlosjobim 1y ago
  That is great, they are by definition a net negative on the economy as a whole? You shouldn't gamble on your own health.
  - _9ptr 1y ago
    Oh come on, you can't be serious. It's not a gamble, you transfer your risk to a collective.
    - eru 1y ago
      It doesn't matter whether your counterparty for your insurance is a collective or a single individual like Warren Buffett. The 'collective' part is a distraction when trying to understand insurance. Similar for insurance to work you don't need to have a group of people who are in the same situation as you: in principle an insurer can work out the risks, even if you are in a unique situation. It's just that working these things out costs time and money, so it's cheaper for you, if you are like everyone else. But eg if you are a famous singer, you can insure your voice just fine. Companies also regularly purchase insurance against customers winning prizes. See https://en.wikipedia.org/wiki/Prize_indemnity_insurance https://en.wikipedia.org/wiki/Prize_indemnity_insurance
  - eclipticplane 1y ago
    Perhaps some life insurance products fall into that category. For many families, though, term life insurance plays a big part into ensuring financial security if one income earner dies prematurely.
  - DrillShopper 1y ago
    If you want to gamble on your health then you want a tontine, not life insurance.
  - deleted 1y ago
    [deleted]
  - A_D_E_P_T 1y ago
    Life insurance, in the past, was frequently illegal. I'd argue that it should be illegal again, as a moral hazard (directly contributing to countless murders and other schemes) and as a particularly morbid form of gambling.
- eru 1y ago
  Why would they all go bankrupt? Seems silly. Yes, some life insurance companies can make mistakes or get unlucky. after a few went bankrupt from whatever you are imagining, you'd think that the remaining companies would change their risk models or simply charge higher premiums?
DavidPeiffer 1y ago
You will be going through underwriting again, your new rate will be based on starting at an older age, and you'll have a new exclusion period begin (unless there are some provisions which prevent these in the event of a company failure). Hopefully you haven't had any significant health conditions present themselves since the original policy went into effect.
- darth_avocado 1y ago
  Insurance companies will find any and every reason to not insure you. A slight change in lifestyle could mean you are no longer covered.
  - sethhochberg 1y ago
    With term life insurance specifically the lifetime policy premiums are typically so low relative to the value of the policy that there's a natural bias towards insuring generally healthy people. Its not uncommon to see policies that are something like $40/month for 20 years ($9600 in premiums) for a $1mm death benefit, for example. People with more complex medical conditions often can get life insurance from smaller, specialized providers... and at much higher rates. But the big mass-market players offering inexpensive term life products are only offering them that cheaply because they really control the risk profile during underwriting.
  - eru 1y ago
    Insurance companies only make money, when they insure people..
Marsymars 1y ago
That’s a pretty bad deal if you’re 10 years into a 20-year term, and your rates were determined prior to a decade of inflation and new pre-existing conditions.
- hiAndrewQuinn 1y ago
  I admit that's unfortunate. I don't think that was a "bad deal" in the sense that anyone grievously misled you or anything. I would feel bummed out, but not angry or like I actually got ripped off, in other words. When I signed up for the 20-year term, part of what I was being asked to do was estimate how likely I think it is for this firm to actually be around for that full 20 years. That's just part of the game.
  - Marsymars 1y ago
    Maybe in some platonic ideal, but in practice a) consumers (and even brokers) aren’t that sophisticated, and b) likelyhood of the company being around in 20 years isn’t baked into the price. When I shopped for insurance there were only 3 options with contract terms that passed muster, and all three companies are large ones that I’d expect to be around in 20 years to a degree that has no relation to the price quotes I got.