[QUOTE=jtgain]
“If I won the lotto tomorrow, and took up SCUBA diving, auto racing, and bought an airplane, the insurance company cannot change my rate.* Hell, I could take my winnings to Vegas and use it all on cheap hookers and blow, and the company would not care. As long as the premiums are paid, the insurance stays in force. This is a fairly common misconception that the life insurance company cares about what you do. They don’t. They don’t care about any one individual; they only care about what large groups of similar people do. If you are looking at a large enough group, if one of them moves to Vegas and goes the hooker and blow route, another member is entering the monastery.” by Rick
This is exactly my point. A lot of you keep saying, well, they would have to pay out more money for smokers, and why should non-smokers have to pool themselves with smokers. Makes sense, but a similar question could be asked: Why should people who NEVER drive drunk, purchase hookers or coke, be forced to pool themselves with those who do? And don’t the insurance companies KNOW (and no, I’m not an actuary, but it’s common sense) that an insurance company will have to pay out more on the groups on people who drive drunk, use hookers and coke vs. those who enter a monastery.
Why, in this example (drunk driving, hookers, coke) does it all “balance out” so everyone should pay the same premium, yet in smoking, risk factors are weighed?
It seems like the insurance company, and some posters here, want to have it both ways:
- Healthy/non-healthy behavior balances out
- Non-healthy behavior does not balance out
And for the third time, I know insurance companies are only in it for the money! I think we have all admitted that. Especially with the example of the “once every six month cigar smoker”.
Who here will disagree that by charging this person a higher premium, that the insurance company is exposing themselves to absolutely no additional risk and pocketing his extra premium?
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Most of what you say makes sense from a pure numbers perspective but you are still missing a different aspect that is fundamental. People that buy life insurance are customers and they have many different options. There are many competing insurance companies out there and the competition can be fierce so they need to market themselves well besides playing with their statistics calculators all day long.
Smoking is a very common behavior and it is easy to divide people into smoking and non-smoking groups. The health risks are know and easilly quantifiable from an actuarial standpoint. A company could lump smokers and non-smokers together but that means the non-smokers would have to pay more and there are more non-smokers than smokers. That wouldn’t look so great on an on-line insurance comparison web site when most people see, say $500,000 in coverage as a commodity item.
Insurance companies can create additional categories if they want. Some companies won’t insure private pilots or skydivers for example but the risks for those activities are a lot harder to quantify and there are relatively few people that engage in them.
Rolling out insurance policies is like any other mass product and it costs money to get all the details and marketing right. Every new exclusion or rate increase that is implemented for certain groups costs both money and time not to mention possible hassle for existing customers. The policies tend to exist for a very long so it is in their best interest to keep them as streamlined as they can while still creating the biggest criteria that are in their best interest.
Smoking is a easy behavior for them to document. Not getting excercise at least 30 minutes 3 days a week is not nor is parting too much or being a wild and crazy guy in general.