Insufficient Premiums

Premium Considerations

  • The non-guaranteed premium concept can be utilized for all forms of nonparticipating insurance, including both term and permanent policies.
  • In setting insurance premiums, the actuary can use pricing assumptions that are as realistic as possible.
  • The actuary is not locked into "50 years" of insufficient premiums if his or her estimates of future assumptions prove to be too optimistic.

--  Richard A. Swift

1980 - NON-PARTICIPATING LIFE PRODUCTS WITH NON-GUARANTEED PREMUIMS, Society of Actuaries

In a low-priced office the climax will be arrived at in about 17 years, after which period there will be a deficiency, and the ruinous effects of too low a rate of premiums will become apparent to the public generally.

1850 - PRACTICAL REMARKS ON THE PRESENT STATE OF LIFE INSURANCE IN THE UNITED STATES,  Harvey G. Tuckett

This paper analyzes the situation which would arise in a system |which provided benefits based on life contingencies and where all participants paid insufficient premiums.

  • We define an insufficient premium as any premium less than the sufficient premium, and the sufficient premium as the one computed by the usual actuarial methods so as to equate the present value of the premiums to be paid by an individual to the present value of the benefits he is to receive, as of the date he enters the system.

Of course no private insurer would charge insufficient premiums even if it were legal to do so.

--- PAUL W. NOWLIN

1959 - Insufficient Premiums, Society of Actuaries