How do life insurance companies determine market value?

Life insurance companies determine market value primarily by evaluating risk assessments and expected costs. This involves analyzing various factors such as mortality rates, health conditions, lifestyle choices, and other risk factors related to the insured individuals. By understanding these risks, insurers can predict potential future claims and set premiums accordingly, ensuring that they can cover claims while remaining profitable.

Additionally, expected costs include considerations of administrative expenses, commissions, and reserves for future payouts. This comprehensive approach allows life insurance companies to set appropriate premiums that reflect both the risk they are taking on and the financial obligations they will face in the future.

While past claim amounts can provide historical context, market demand and competition play a role in pricing strategies, and customer satisfaction is important for customer retention, these factors do not directly determine the market value in the same fundamental way that risk assessments and expected costs do.