Today, insurance companies have increasingly more encompassing and detailed data bases and incredibly more computational power to build their calculations of premiums (that is prices) on fine tuned probabilities.
The use of computer and of various kinds of software for analysis, comparison and presentation became widespread among agents and brokers; actually, this development increased the advantage of brokers over agents tremendously.
Finally, the availability of insurance related materials on the Web can make consumers more prepared, aware and alert in dealing with such issues. I think, the day when a lot of consumers will buy insurance policies on the Web, just like the way they have started doing other type of financial dealings electronically, is coming, and many of today's agents and brokers will have to look for another profession. That new profession might easily be a for-fee personal finance/insurance consultancy, since the complexity of many individual cases will still require more than what can be picked up easily from even the best Web sources.
While selling insurance on-line will probably decrease the cost of insurance on the long run, the factor of enhanced consumer interest and monitoring ability that has become evident will probably increase the cost of insurance on the short run. It is bad news in the sense that we will have to pay more for the same coverage (unless, of course, we will have bought a guaranteed premium policy earlier), but it is good news in the sense that it will reflect better service by the insurance industry. Litigation against unscrupulous companies and agents have become increasingly frequent and successful, and it is dangerous to the companies. As a consequence, they are forced to become more reliable and accountable, ... and this costs them money, ... and this costs us money too. All in all, the consumer will probably end up with better service for a higher price in the next few years.
Actually, something like this has been going on for a while. Premiums on long term disability (D.I.) plans are climbing, and the screening is becoming stricter; clients in some professions have to pay more, or can buy D.I with less attractive conditions, than a few years ago. At the same time, other people (mainly self-employed ones, starters, or those in low paying, part-time, or risky manual jobs, or with certain health problems) who could not buy any disability protection until recently, now have not just 'some' choice, but guaranteed, non-cancellable disability insurance as well. They can buy protection against injuries only, or against injury and sickness, around the clock.
Demographic, economic, and social changes led to the emergence of new insurance needs, to which the industry's response was the creation of brand new types of policies. Critical illness insurance and long term care insurance are the most important examples for this. Both address first of all the needs of the individual, as opposed to that of dependents and survivors. These needs result from increased frequency of life situations where someone is to live long periods of time without being able to properly support themselves, because of either diminished physical capacities, increased costs of living and/or health care, or reduced earning power. Of course, with even these new kinds of insurance, there is no such thing as perfect protection against the financial damages of death, illnesses, or injuries (not to mention other consequences), ... but these new policies do help to control and manage inevitable risks better, enhancing this way human lives, independence, and dignity.
With life policies, there is an interesting duality of price movements going on. On the one hand, premiums of permanent (especially T100) policies has increased (mainly because companies expected higher attrition rates than what turned out to be the case), while, on the other hand, term prices have decreased recently. Perhaps the major incentive, or necessity, to decrease term premiums is the emergence of sharp competition that traditionally was not a strong characteristic within the insurance industry in Canada. There has been practically no danger of company failure in this industry up to this decade; however, foreign competition and a wave of company wind-ups give a shot in the companies' imaginary arm today. As a consequence, they demand lower term premiums, ... some even decreased theirs towards the level they had been charging to U.S. customers (where competition forced them to these lower premiums earlier).
Another novelty, again especially with term policies, is the increasing sophistication of distinguishing various levels of risks. Many companies offer not only 'smoker' or 'nonsmoker' policies, but also one or more 'preferred', 'select', or 'super select' categories for those who are the healthiest, have the best family health history, have healthy and risk-avoiding life-style, etc.
Resulting from the pressure of competition, there are an increasingly wide choice of combination of policy features, and various 'add-ons' that all make finding one's way in the insurance jungle more difficult, but also they give better chance to really tailor-make policies according to individual situations. Savings on policy fees (administrative costs) due to multiple life coverages and other combinations (through various 'riders', such as 'children protection', 'term', 'disability', 'living benefit', 'business overhead protection', 'critical illness', 'health and dental', 'return of premium', 'accidental death and dismemberment', 'inflation protection', 'additional insurance coverage', or 'retirement saving protector' riders) are sometimes significant, in addition to the better match of feature options to needs.
Competition is heated not only among insurance companies, but also between the insurance industry and banks and other players of the financial sector. Insurance companies are trying to defend their turf mainly from the banks, and at the same time they are expanding their areas of interest to other non-traditional fields. Universal life policies, their increasing sophistication and mushrooming creative applications are mainly the cases in point. As a result, it is not just the self-aggrandizing sales pitch of the insurers that saving connected to insurance protection is frequently quite competitive with other forms, such as mutual funds or RRSPs, even if we disregard the risk protection itself. The main factors to this, as you can check it out in several financial planning publications, are good returns from widely diversified investments, preferential tax-treatment during both accumulation and pay-out, protection from creditors, and guaranteed minimum returns; the last two items in the list being not even available outside insurance policies.
Guaranteed return of the capital and high level of creditor protection are the main attractions of segregated funds that are becoming increasingly popular among investors. Risk-averse people appreciate the first feature, and the second one is mainly important to small-business owners and professionals who can have high risk of personal liability. No need for probate at death is another feature that gives segregated funds extra points when compared with traditional mutual funds. The most recent development on this field has been the introduction of reset-options for the guaranteed amount. What it means is that if the fund value has increased, the owner can lock-in at that new, increased level for a new guarantee period. While not all segregated funds' performance is excellent, there are some that have very impressive track record. Earlier, segregated funds were offered only by insurance companies. Recently, however, mutual fund companies also have started to launch their own segregated funds, in cooperation with insurance companies.
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