In the insurance industry, our product is a promise. While that product may carry names like “term life,” “long-term care” or “deferred annuity,” what customers actually are buying is the security and peace of mind that comes with knowing insurers will live up to their obligations when needed most. This relationship between insurers and consumers is unique. Consumers receive no tangible goods upon purchase, and insurers may not know their cost of goods sold for nearly a century after a sale is completed. To add even more complexity, these promises are made in the face of enormous uncertainty around the long-term biometric and macroeconomic experience factors upon which they are priced.
This article was originally published by The Actuary.