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Why non-life insurance is of short term and life insurance is of long term ?

D

Duc Thinh Vu

Active Member
I would like to "Why non-life insurance is of short term and life insurance is of long term ?"

I wonder why don't non-life insurer sell the long-term product like for 10-20 years ? Because by doing so, I think it encourages the policyholders to stick with the company.
Or, in contrast, why do life insurer often sell long-term product instead of short term product ? Because by doing so, short term product helps the life insurer reduce the long term obligation towards the policyholders.

In general, the real question is maybe "What is the main reason for an insurance product designed to be long term or short term ?", is there any reasonable reason or it is just due to the fact that "because the insurers like doing so" ?

Thank you very much for your help!
 
I think you can probably think through this one yourself Duc. So two questions for you:
1) would you buy 20-year long car insurance?
2) would you buy life cover that runs out after a year?
Think about your needs, and how the products match them (or not)...
 
Ian Senator said:
I think you can probably think through this one yourself Duc. So two questions for you:
1) would you buy 20-year long car insurance?
2) would you buy life cover that runs out after a year?
Think about your needs, and how the products match them (or not)...
Click to expand...

Hi, thank you very much for your help. However, i think it is reasonable to ask for a 5-year car insurance or a 20-year health insurance. So i think there are more reasons to explain this phenomenal.
(and moreover, it is, ultimately, not unreasonable to ask for a 1-year life insurance coverage in my point of view. but i agree that it would be very strange).

Thank you for your help and if you can think of another reason, I am very pleased to know it.
 
Well, there are loads of other reasons, far too many to go through here. There are implications for pricing, reserving, competition, markets, demand, supply, tax, capital, etc etc. Subject CP1 covers a lot of this at a basic level, and Subjects SP7, SP8, SP1 and SP2 go into further detail (although you probably won't study all of these!).
 
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