There are a number of factors and considerations taken into account by an insurance company when calculating the premium of a Hong Kong Life Insurance plan.
On this page CCW Global will explain some of the common variables and factors looked at in life insurance premium calculations.
Major premium considerations will be used in the calculation of all life insurance policy premiums in Hong Kong.
One of the core aspects of life insurance, especially with for the provider of the policy, is understanding the expected rate of death for individuals within a community. The statistical analysis of mortality rates within a specific population of people is crucial for the creation of accurate life insurance premiums.
Without knowing how often people die, on average and at what rate, an insurance company is likely to get the premium of a policy wrong – either making it too high or too low.
Life insurance plans, on the whole, work on the principle of collecting money now for a settlement in the future. Because of this a large amount of time will normally pass before the death benefit of a policy becomes payable, and the premiums already paid can be put to work by the insurance company in the form of investments.
The interest earned on the investments purchased by the premiums paid to the insurer can have a major impact on the overall cost of the policy. If, for example, the insurer expects to earn higher amounts of interest from its investments it will be able to charge a lower policy premium with which to cover its risk.
The combination of Mortality Rates and Earned Interest considerations is the net premium of a life insurance policy. These two factors can be called the “pure premium” which covers the risk. However, the pure premium of a life insurance policy is always adjusted to reflect all expected expenses incurred by the insurance company in its role of providing the coverage.
Expenses that are typically included in the policy premium calculation normally include things like business and operating costs of the insurer, sales commissions, tax, rent, and the normal costs of doing business in Hong Kong.
Outside of the above mentioned factors there are an array of secondary considerations which can impact the cost of a life insurance plan.
A quirk of life insurance can be found in the fact that the policy holder can choose to purchase either a participating or non-participating policy.
If a policyholder chooses to obtain a participating policy then they are able to receive a share of any surplus made by the insurance. This is also known as a For-Profit life insurance plan. If a policyholder choose a non-participating or Non-Profit policy then they will receive no such share.
Participating life insurance plans usually carry a much higher premium than non-participating policies. It should also be noted that Term Life Insurance Plans in Hong Kong are normally not available on a participating basis.
Because Hong Kong has a free and open insurance market any insurance company is able to charge for their products the premiums which they see fit. Customers, however, are not obligated to buy these products if the cost is too high, while an insurer whose premiums are extremely low may be a cause for concern. Furthermore, adverse or advantageous economic conditions can have an impact on policy premiums.
As such, insurance companies will routinely benchmark the performance of their premiums against those of their competitors in order to get an assessment of their validity and adjusting them as needed.
Additionally, in the event that there is a long term increase in taxation rates this may be reflected by a prolonged hike in the premiums being offered by an insurance company.
Developments in public health cannot be ignored when dealing with life insurance as new risks can seriously change the insurance company’s risk of coverage. If, for example, a new deadly disease breaks out which is likely to kill a large number of people then the risk of policyholders dying increases as will, consequently, the overall policy premium.
However, in the modern age breakthroughs in medical science are occurring daily – many of which can prolong life, allowing the insurer more time to manage the policy and resulting in lowered premiums if they are significant enough.
If you would like to see examples of the premiums available from Hong Kong life insurance companies, or if you would like to receive a free quote for any of the Hong Kong Life Insurance plans offered by CCW Global, please complete the short form at the top of this page.
Once you have submitted your quotation request a CCW Global insurance broker will contact you with a comparison of options best suited to meet your specific requirements. You can read more about our life insurance quotation process by clicking Our Life Insurance Quotes.
In the event that you have any further questions about life insurance premium calculations in Hong Kong, or if you would like to learn more about the life insurance products we offer, please Contact Us to speak with an expert advisor today.