The Mortality Mortgage: Pricing Practices and Reform in the Life Insurance Industry

THE MORTALITY MORTGAGE PRICING PRACTICES AND REFORM IN THE LIFE. INSURANCE INDUSTRY - In this site isn`t the same as a solution manual.
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The life insurance industry, through marketing and advertising, has taught the public to focus on premiums, death benefits, and cash values; financial elements are ignored. The Mortality Mortgage compares and contrasts three financial models: Additionally, it provides the formulas necessary for appraisal of a life insurance plan. With an appraisal, a comparison of insurance policies is possible.

Once pricing is understood, consumers will demand full financial disclosure through regulation of the life insurance industry. I hope that life insurance agents will read this book, so they can understand what, exactly, they're selling. Barnes has offered us all a way to understand the most inscrutible financial vehicle this side of derivatives.


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Life insurance is not a product, it is financing. Four factors denote financial quality: Consumers understand these financial elements for homes and bonds, but they do not equate the fundamentals of financial quality with life insurance. The life insurance industry, through marketing and advertising, has taught the public to focus on premiums, death benefits, and cash values; financial elements are ignored.

The Mortality Mortgage compares and contrasts three financial models: Additionally, it provides the formulas necessary for appraisal of a life insurance plan.

Product details

With an appraisal, a comparison of insurance policies is possible. Once pricing is understood, consumers will demand full financial disclosure through regulation of the life insurance industry. Barnes has offered us all a way to understand the most inscrutible financial vehicle this side of derivatives. We, as a profession and as a society, should make the most of it--and, now that the genie is emerging from the bottle, begin to learn to live with the consequences. Would you like to tell us about a lower price? If you are a seller for this product, would you like to suggest updates through seller support?

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Read more Read less. Prime Book Box for Kids. Insurers have some latitude in choosing a computation basis for their reserves and guaranteed values; a lower interest rate and a less favorable mortality table will produce a higher net single premium. Insurers also add loading to their net premiums to cover their expenses and profit.

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To appraise a policy using Barnes's method, you add the first-year acquisition costs Barnes calls them "closing costs" to the insurer's net single premium Barnes calls it "wholesale principal". The sum Barnes calls it "retail principal" tells you how much you're lending to the insurer. If you're lending a lot more than the death benefit is worth as defined by Barnes , that's bad.

Quality means "principal balanced with collateral. Advisors who evaluate policies this way will want to make sure that their errors and omissions coverage stays in force. Barnes says that life expectancy is defined as the point at which half of the original population is still alive. Life expectancy is a mean, not a median. He implies that insurers use life expectancy for product pricing.

Not true; in fact, they would eventually become insolvent if they did. To see why, look up Jensen's Inequality in a statistics textbook.

Pricing Practices and Reform in the Life Insurance Industry

The CSO table provides a conservative basis for determining reserves; actual mortality rates used in product pricing are typically about half of the CSO rates. Barnes is on more solid ground when he complains about the insurance industry's lack of disclosure. Every fee-only advisor knows how infuriating it can be to deal with insurance companies and their agents. You frequently have to make special requests for basic information needed for prudent decisions. Barnes attributes this to the industry's conspiratorial marketing strategy, but there's no need to invoke conspiracies.

Life insurance is sold, not bought. Most people don't demand much information before making a purchase, so why should companies supply it? If everyone suddenly stopped sending in their premium checks, we'd have full disclosure in a few weeks.

The Mortality Mortgage

It's just a question of bargaining power. The Mortality Mortgage may appeal to people who are easily impressed by claims of revealed secrets.

There are a lot of people like that, so the book could become popular.