Pricing strategies in the German term life insurance market: An empirical analysis

The life insurance sector is highly regulated. Areas of
regulation include not only solvency requirements
but also product pricing. In most industries,
companies aim to increase producer rents by using
information regarding the customer's willingness to
pay (WTP), which allows them to endeavor price
discrimination if no perfect competition prevails. In
this article, we investigate the pricing behavior in
the German Term Life insurance market by analyzing
market prices, actuarial fair pricing, and the
WTP for eighteen customer groups and three
product categories. The results show that premiums
charged for budget Term Life insurance products
are in some cases even below the actuarially fair
price. For term life insurance products with
additional services, regulation, and market conditions
hinder insurance companies from employing
advanced strategies of price discrimination and the
employment of the WTP.