Sunday, March 04, 2007

Lose the Fat to Lower Your Insurance Rates

Want to lower your life insurance rates? Cut your BMI or Body Mass Index. Read the short article here or here or here.

The basic idea is that if you are healthier, you live longer and life insurance companies like that. Some of my students might recall one of the lessons from the supply and demand game. That was that one condition for markets to work optimally is that buyers and sellers have equal access to information. When they don't, markets won't work as well as they should.

For instance, in used car markets, the sellers know alot more about the product than the buyers. Economists have studied the problems this causes in the "market for lemons" research. But in insurance markets, buyers know more than the sellers. You know how risky you are but the insurance companies don't. Insurance companies want your premiums to reflect your risk. The riskier people need to pay higher premiums. Now, with the lower rates for people with lower BMIs, they are getting closer to matching risk with premium levels for individual customers.

1 comment:

Champ said...

very interesting topic, I think you're a great thinker. Maybe that's why the Colonel (Mr. laRocca) thinks you're brilliant. I think I get smarter every post. Keep going, you can never stop, not even after the Noble Prize. ;)