Message from Our Founder
I’m pleased to announce the launch of Colva Insurance Services, a premier life insurance servicing company that draws upon years of actuarial and insurance expertise to help save policyholders thousands of dollars in premiums while maximizing the death benefit coverage they receive.
I initially started my insurance career working as an actuary for a large life insurance company helping to price and design life
insurance policies. I then worked for a large institutional investor who invested in life insurance policies and was personally responsible for designing insurance solutions aimed at saving these investors millions of dollars a year in premiums while maximizing the death benefits they received.
During this time, I learned a lot about how life insurance policies work, are priced, and are made profitable. I also came to realize that a lot of the way life insurance policies are designed are based on policyholder behavior and experience. Often times, people make decisions with regards to their life insurance policies that are not in their economic best interests. This can be of severe economic detriment as the average policyholder will spend thousands of dollars over the course of his or her life on life insurance. This is often due to the fact that they do not have as much knowledge or understanding of insurance as much as people within the industry do. As a result policyholders often make the following mistakes with regards to their policies:
- Purchasing more insurance than they need or can afford only to cancel the policy a few years
after acquiring it.
- Continually canceling and purchasing/converting new insurance policies.
- Spending thousands of dollars on a permanent insurance policy for short-term needs when they
would have been better off purchasing a term insurance policy and investing the difference elsewhere.
- Spending thousands of dollars on a term policy for long-term needs when they would have been
better off purchasing a permanent policy and accruing tax-deferred interest on their premiums as
opposed to receiving nothing from a term policy.
Life insurance companies know policyholders engage in this behavior. For example, a 2005 study by the Society of Actuaries revealed that greater than 65% of all long-term policies (30 plus years) purchased by those younger than 50 years old were canceled. Actuaries are hired by these companies to study this behavioral data and design policies around it to maximize the profitability of the life insurance products they sell.
As people get older, the chance of them dying increases. Insurance companies, however, often charge a premium that stays the same for every year of the policy. This means that when you purchase a life insurance policy you are over-paying for it in the early years, and under-paying for it in the later years. When policyholders engage in the behavior described above, they are essentially spending thousands of dollars in premium in the early years of the policy and not staying around to receive the benefit that comes from it in the later years.
Rajiv Rebello, FSA, CERA, MAAA