How the Life Insurance Business Preserves Liberty
Let’s suppose life insurance companies were prevented from individually underwriting applicants. The situation would be similar to that which is taking place in the health insurance marketplace today. The parallels could be as follows:
Just as the benefits have been mandated for health insurance, face amounts would be mandated for life insurance. Individual need would not be the primary determinant of the death benefit purchased. This means that people who make $1 million per year and have a net worth of $10 million, could end up with the same amount of coverage as people who make $35,000 a year and have less than $2000 to their name.
Just as community rating has been dictated for health insurance, it would be dictated for life insurance. Medical condition and lifestyle would not be the primary determinants of premiums charged. This means that people who are perfectly healthy and lead a quiet life, could pay as much as people who have heart disease and climb mountains.
Just as eligibility has been made compulsory for health insurance, it would be made compulsory for life insurance. Probable mortality would neither qualify nor disqualify applicants for coverage. People who have just been diagnosed with a terminal illness could get a policy just as easily as a newborn.
I think it is clear that such drastic changes would prevent most people from getting the coverage they need at the price they should have to pay.
The opportunity to qualify for the lowest possible rate highly motivates the life insurance purchase. People who understand the economics involved fully appreciate how individualized underwriting can work in their favor. The system is fair, and people really couldn’t ask for more.
Not only that, but the industry has made provisions for extreme cases. Those people who cannot qualify for a fully underwritten product can purchase one that is guaranteed issue, or with simplified underwriting. If they manage to improve their health or change their lifestyle, they can qualify for a product with better pricing.
If their funds are limited, then they buy the coverage they can afford. If they manage to improve their financial picture, they can purchase an additional policy.
The life insurance marketplace services the vast majority of consumers the vast majority of times in a fair and just manner. We all have an equal opportunity to qualify for the most coverage at the best price. This is in stark contrast to what is currently taking place with health insurance.
Which system do you prefer?