Premium rates for individual term life insurance in the US will
continue to fall in 2008 but at a much slower rate than has been
seen for many years, predicts Steven Weisbart, vice-president and
chief economist of insurance industry body the Insurance
Information Institute (III).
According to Weisbart, premium rates in 2008 will fall by about 1
percent compared with current levels, a significantly lower decline
than the average annual 4 percent decline experienced since 2000
and the average annual 15 percent drop between 1994 and 1999.
Indicative of premiums in 2008, the III estimates that, for
example, the annual premium for a 40-year-old male non-smoker
buying a $500,000 20-year level term life insurance policy in 2008
will be about $725 if he qualifies as a standard risk and $350 if
he meets the more stringent requirements of a preferred risk. Rates
for women and younger people would be lower. For example, the
comparable rate for a 40-year-old female non-smoker would be about
$600 for a standard risk and $300 for a preferred risk.
The III estimates that the annual premium for a 40-year-old male
smoker buying a $500,000 20-year level term life insurance policy
in 2008 will be $1,775 or $1,400 if he qualifies as a preferred
risk. Comparable premiums for a female smoker are $1,350 as a
standard risk and $1,000 as preferred risk.
It is not only the increase in life expectancy of people that is
helping to drive term life premium rates down, said Weisbart. Also
playing a role is a decline in death rates among people at the main
life insurance buying ages.
In addition, added Weisbart, the life insurance industry has become
more efficient. For example, as a proportion of total premiums,
home and field office expenses dropped from 10.1 percent in 1995 to
9.0 percent in 2005, according to III calculations. This drop, he
explained, was due partly to mergers and partly to technology