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Clarifinancial Saves You Up to 36 Percent More, Research Shows

Written by Aaron Pinkston, Thu, Jan 07 2010

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The internet made the life insurance market more competitive. In the 1990’s, with the boom of early insurance aggregators, researchers at the University of Illinois and University of Chicago found a link between increased competition and price. “The internet has reduced term life prices by 8-15%.” While many might think the decreases in average premium occurred because of lowering mortality costs or increased business efficiency, this is not the case. The decrease in prices only occurred with products for sale over the internet, and did not occur with products that were hard to compare at the time, like permanent life products. This change also began to occur in 1996 before the majority of life insurance companies updated their mortality rates. (faculty.chicagobooth.edu/austan.goolsbee/research/insure.pdf)

It stands to reason that if all insurance products were made easy to compare, prices would fall universally. This is still problematic for the individual insurance buyer because insurance contracts are complex and the shopper’s information may be incomplete. In addition, insurance industry jargon often serves to muddy the waters rather than clarify.

In a discussion of the effectiveness of different procurement practices, a working paper at the National Bureau of Economic Research discusses the weaknesses of auctions over negotiations when gathering competitive pricing. “Auctions perform poorly when projects are complex, contractual design is incomplete and there are few available bidders.” (http://www.nber.org/papers/w9757)

So while an auction may be the perfect setting for individual life insurance shoppers, industry complexities and an inability to create specifications prevent this from happening. If individuals could perform a bidding contest, we have indications as to how it may benefit them.

Businesses are already discovering the benefits of buying insurance through bidding. In conjunction with Hewitt Associates, a University of Minnesota research team conducted a three-year study of insurance costs for over 50,000 employees. The results show that the auction took less time and money for the businesses, while resulting in a 2-21% savings in premium. (http://gateway.nlm.nih.gov/MeetingAbstracts/ma?f=102273977.html)

But the benefit of an auction for insurance products is not limited to price alone. Other quality factors are often important too, like speed, company stability, and guarantees. Performing an auction along multiple dimensions can become confusing. Research based on the Department of Defense data suggests that shoppers will tend to choose a bid of slightly higher quality than might normally match their basic requirements. Higher quality auction results are not much of a penalty because quality and price are not necessarily correlated for life insurance. (http://www.jstor.org/pss/2555752)

By choosing Clarifinancial, the only single place that allows you to perform customized auctions for individual life insurance, you may find savings of 10-36% while choosing a higher quality policy. Save more. Get more. All of a sudden choosing sounds easy.


*While using Clarifinancial may well save you money and help you choose a better than average life insurance policy without any unwanted phone calls or emails from agents, your actual savings may vary. Any stated savings amount is not a claim of actual or expected savings. But let’s face it, you know you want to see how good our service is. So start now.