In general, the term “financial engineering” refers to the type of activity associated with the creation and use of innovative financial instruments and technologies.
How financial engineering can revive life insurance
Some modern insurance products allow customers to not only protect their families but also use the accumulated funds for various needs during their lifetime. For example, universal life insurance policies offer both coverage and investment component allowing you to accumulate capital that can be used for various purposes (for example, retirement or buying a home).
Some companies offer combined products that include not only life insurance but also components such as additional medical coverage, disability coverage, or critical illness coverage. These products make insurance more attractive and “multi-functional” reducing the need to purchase several different policies.
Using new technologies such as health tracking devices (fitness trackers), some insurers offer policies that change terms depending on the client’s health. For example, if a person leads a healthy lifestyle, this can reduce the cost of insurance coverage. This approach encourages people to improve their health making life insurance more “interactive” and motivating.
Creative financial engineering makes life insurance less boring turning it from a simple protective instrument into a multifunctional financial product. Today, insurance companies offer flexible solutions that can include elements of investment, tax planning, health protection and other components. This allows customers to get more benefit from insurance policies making them more attractive and adapting them to modern needs.
Source: https://www.ft.com/content/c4e5e032-9d47-4763-862a-19435f54279d
Photo courtesy of public sources
