If you've ever shopped for life insurance, you know that all policies are not created equal. Availability of riders, dividends, and policy provisions are just some of the variables that differentiate one policy from another.
Most consumer advocates counsel potential policyholders to look at three factors before buying a life insurance policy: company strength, claims service, and price.
Financial strength is important because it has bearing on a company's ability to meet obligations to policyholders, and to weather adverse market conditions. Consumers can easily check out a company's financial strength by reviewing information from ratings agencies such as Moody's, Standard and Poor's and Fitch. A visit to a Web site, such as www.dalbar.com 
, can provide information about which companies deliver top-drawer claims service.
When it comes to price, however, things get a little more complicated. As with anything you buy, the cheapest isn't always the best, but neither is the most expensive. If you've looked at whole life policies recently, you know prices vary widely and it's difficult to make an apples-to-apples comparison between policies. How can you know if you're getting the policy that is best for you?
The more important question to ask, perhaps, is not how much does a policy cost, but what value are you receiving for your premium dollar? Below are some of the considerations life insurance companies, and specifically New York Life, take into account when pricing a policy.
Please note if you pay your premium other than annually, the total premium paid each year will be more than the annual premium.
When pricing a policy, companies consider several factors. These factors include mortality, persistency, investment earnings, and expenses.
These factors along with a company's unique value proposition — the idea or concept that separates a company from its competition — affect how companies price their products. For example, one company's value proposition might be to provide the lowest cost insurance in the marketplace. This company will compete on price alone. To have lowest price, this company may be willing to sacrifice the solid financial practices that would earn high marks from the ratings agencies, have a less than first-class service operation in order to keep overhead down, or fewer policy features that offer stability. This company has the lowest price. Does it offer the best policy? If your decision is guided strictly by economics it may. It all depends on your needs.
In contrast, another company might want its policies to provide policyholders with maximum flexibility and first-class service. These policies may be the most expensive in the market. Are they the best? For those consumers who want the flexibility and service it probably is. For those who see no need to pay for "bells and whistles" that they feel they will not use, there are better alternatives (however, their needs may change in the future).
New York Life's value proposition is a simple one: to deliver the highest quality products at the lowest possible price with the promise of ongoing service and support from the most professional sales force in the industry. New York Life's pricing model is based squarely on this value proposition.
The key factors for New York Life include a commitment to financial strength, agent training and support, and policyholder service.
Agent Training:
To support its agents, New York Life invests millions of dollars annually to provide the best training and professional education. The cost for this training is also factored into our pricing.
The role of the New York Life agent is not simply to sell a policy, but to guide policyholders, to help them select the right policy for their specific needs and budget.
"Our agents do an excellent job of explaining the policy, educating their clients and providing follow-up service," says President Fred Sievert. "Our agents are the reason so many of our policies stay in force for so many years."
Financial Strength:
New York Life's pricing model also supports its unsurpassed financial strength. A part of the pricing model is to achieve profits while setting aside some amounts each year, that accumulated with interest, are adequate to pay future claims and support policy guarantees. The company must also set aside some profit to build a prudent level of surplus in case of future loses.
Policyholder Service:
New York Life and its subsidiaries have been recognized for providing outstanding service to policyholders and are committed to making continuous improvements. These ongoing service improvements include generating and sending out consolidated policy statements, maintaining online service features that offer up-to-date account information and self-service functions.
Each of these pricing factors is consistent with New York Life's mission as a mutual company, which is to run the company for the sole benefit of its policyholders. The goal of the pricing process is to produce a policy that keeps the company financially strong and offers clients competitive options at competitive prices.
Other factors that enter the pricing equation include competitive information. In pricing its policies, New York Life must also meet regulatory requirements from states and federal regulators. For example, the company must comply with state regulations, which requires a product to satisfy certain tests before it can be illustrated for sale.
Policyowners can add additional features — called riders — to their policies if they choose. Most riders have an additional cost associated with them and provide an additional benefit. Some common riders are Accidental Death Benefit, Waiver of Premium, Term Riders, and Policy Purchase Option Rider.
The insurer pays an extra death benefit if the policy has an Accidental Death Benefit Rider and the insured dies by accidental means. If the policy has a Waiver of Premium rider, the insurer will pay the insured's premiums if the insured becomes disabled. Term Riders provide term coverage just like a term policy and the Policy Purchase Option allows policyowners to purchase additional coverage without evidence of insurability. New York Life has approximately 20 other riders in addition to those mentioned above. This affords policyowners the ability to buy a combination of base plan and riders that suits their needs. Conversion privileges are policy provisions that allow policyowners to convert from term to permanent insurance without providing evidence of insurability. New York Life allows conversions to almost all permanent plans that it or its affiliates offer on the date of conversion. This provision adds a great deal of value to New York Life term plans.
At the end of the day, the most valuable feature a policy from New York Life or one of its subsidiaries offers a policyholder is the promise to pay in the future. New York Life's strict adherence to financial strength and integrity over the years has enabled it to keep its promises since 1845.
Be the first to Comment
