Ask HN: Why not have reverse life insurance that rewards longevity?

[amichail]

In particular, reverse life insurance would only pay out to your loved ones if you live beyond a certain age.

This would encourage your loved ones to keep you alive until you reach that age.

[Ishmaeli]

That's what annuities are designed to do.

In life insurance, you pay the company a small periodic payment in exchange for a large lump sum payment if you die while the coverage is in force. If you die after paying just one premium, you win! If you live so long that you paid more in premium than the lump sum, you lose!

With an annuity, you pay the company a large lump sum in exchange for a small periodic payment for the rest of your life. If you die after receiving just one payment, you lose! If you live so long that the company pays you more than your initial lump sum payment, you win!

[blairanderson]

yes and simple calculators are everywhere: https://www.schwab.com/annuities/fixed-income-annuity-calcul...

Its basically 5% Annually... to which stock-people say "why not put into a dividend earning fund" and analysis paralysis kicks in...

[rundmc]

But the annuity only 'rewards' your longevity if you live 15-20 years or more because that is the bare minimum it takes to get back your capital.

[muzani]

I used to say insurance was a form of gambling, but it's really just planning around worst case scenarios (dying before I can save for kids' education).

Annuities sound like the actual gambling, lol.

[PaulHoule]

It's a general problem in retirement that if you live a long time you could outlive your savings. Some answers are

https://en.wikipedia.org/wiki/Life_annuity

and

https://en.wikipedia.org/wiki/Tontine

[rundmc]

The OECD Pensions team has recently confirmed that in this current environment, tontines offer better value for consumers than annuities.

[cryptonector]

I don't understand why tontines are illegal in the U.S.

[d--b]

This is what we call life insurance in France. It's quite common.

An insurance that pays your loved ones if you die is called a "death insurance".

An insurance that pays you if you live past a certain age is called "life insurance". It's basically a pension fund (except that your loved ones do not get any money you set aside if you die - so usually people take both life and death insurance)

[Ayesh]

we have "life insurance" (that pays on death), and "pension plans" that trickles money to your account until you eventually die. But the terms "death insurance" and "life insurance" (in French) make so much sense! Those are how I will call them from now on, no matter how telemarketers who call me name them.

[aynyc]

This would encourage your loved ones to keep you alive until you reach that age.

Besides insurance companies for profit motive aside, this might create a lot of unnecessary medical procedures to simply prolong someone's life, even if the quality is total shit.

[988747]

No need for medical procedures. There was this scheme in Greece, where people would simply not report deaths of their parents, bury them secretly in the backyard, and continued to receive their pension payments.

[rhn_mk1]

There's a dual to that in life insurance, where it incentivizes procedures (or inaction) to shorten life.

[DennisP]

Could fix that by making assisted suicide an option for the patient. Patient has to live, and want to live.

[rundmc]

Because life insurance companies make profits by:

a) overcharging you for covering the risk of you dying too early (death insurance is marketed as 'life' insurance)

b) overcharging you for covering the risk of you living so long that you run out of money (fixed annuities).

Disclosure: I am the founder of https://tontine.com which will shortly launch a lifetime income solution that will reward you for living longer and we are hiring.

[jaclaz]

Only as a reference on the history of tontines:

https://en.wikipedia.org/wiki/Tontine

[WFHRenaissance]

How long before you start killing customers because they're living too long?

[jfengel]

I will say I'm impressed that you secured the domain name. That word was precisely what came to mind upon reading this question. A tontine is precisely insurance against living too long.

[dragonwriter]

> death insurance is marketed as 'life' insurance

Looking at other insurance, naming after the thing insured (auto insurance, life insurance, motorcycle insurance) is pretty common, as is naming after the class of people who might want it (homeowner’s insurance, renter’s insurance) and the source/cause/type of loss insured against (flood insurance, malpractice insurance).

I don't think any of those is more fundamentally “correct”, and they are all marketing tools.

[polishdude20]

What sort of guarantee is there that this company will be around to pay this insurance our by the time I'm most likely to die? I'm 29, say I've got another 50 years left. Is there some insurance or assurance you can give in the event of the death of the company? A sort of meta-tontine?

[obiefernandez]

Regarding hiring: Is your software written in Ruby on Rails?

[Bostonian]

There exist fixed annuities that pay you $X annually as long as you live, which can be thought of as reverse life insurance.

If you are rich and spend say $200K annually on yourself in retirement and buy an annuity that pays $300K annually, and you tell your heirs that the $100K excess will be given to them annually, that would create an incentive for them to keep you alive. If you are that rich, however, they might want you to die sooner to get access to your other assets.

[rundmc]

If you want your kids even more incentivised to take care of you and help you live healthier & longer, you need to turn yourself from a potential financial liability (the kids will have to support you if you run out of money) into an income generating asset by joining a Tontine (see https://tontine.com/explainer)

[SilasX]

Since it's reverse life insurance, I had this shower thought that the incentives should be the opposite. Like, for life insurance, you get discounts for factors that make you a low risk of dying. So for annuities, shouldn't you get bonuses for factors that make you a higher risk for dying?

"Yeah, I just want this annuity to ensure my financial future while I ride out my retirement as a skydiver..."

[NickRandom]

I'm not sure about what the concept is but tell me if this is more or less it -

So you pay me (the insurer) a monthly premium and if you live to be 150 years old I pay you a million dollars and if you die earlier than that all I get is the money from the premiums? Ok, I'll take that deal and wouldn't have any problems getting reinsurance on it. Fantastic, write me a check.

150 y.o is a bit too high? Ok, no problem we'll make it 109 years. I'll still take the deal (and your money).

Lower that to you making it 40, 50 or 60 y.o to get the payout? No thanks. Well, not without a full medical and access to some actuarial tables :)

[the_only_law]

> Lower that to you making it 40, 50 or 60 y.o to get the payout? N

How about 90? It's pretty old, and many people won't reach it, but it's not exactly super rare either.

Then again, one topic that's popular on HN is age extending technology, if that ever became a realistic option you're screwed.

[tptacek]

Isn't this basically how social security, or, for that matter, a defined benefit pension works?

[scrappyjoe]

You should research to tontines, as they are somewhat related. You pay a lump sum along with a number (10-1000) of people of a similar age to buy an asset - say, a property - and then you each receive an equal share of the income each year. As people die off, the income is shared across successively less people until at the end it’s only one person who receives the income of the entire asset. At the death of the final recipient the asset generally cedes to the administrating company as payment for their administration over the life of the tontine.

[woojoo666]

> As people die off, the income is shared across successively less people until at the end it’s only one person who receives the income of the entire asset

Oh so kinda like hunger games

[treis]

Because I want my family to be supported in the event that I die early. I don't really see much value in leaving them a prize for dying old.

[toomuchtodo]

Indeed. You're buying a put option on yourself to insure against a black swan event.

[rundmc]

But if you live so long that you run out of money then you become a financial liability to your family. That's why longevity insurance makes sense.

[jfengel]

They don't need a prize for you dying old. But you yourself would benefit from insurance against outliving your savings.

[jimkleiber]

> This would encourage your loved ones to keep you alive until you reach that age.

And encourage the insurance company to want you dead.

I like the thought exploration and fear the incentives.

[diordiderot]

Insurance company isn't the beneficiary of excess.

[gifjif]

Insurance in ANY form is gambling. Plain and simple. It is a bet that takes places. Just framed in a more flowery language compared to a traditional betting statement "If I win you pay me x, if you win I pay X".

Insurance company: " Pay me $xxx per month, if something happens to you, we will pay you X"

You may benefit i.e your insurance claim is more than the premiums you have paid, or you can loose out by paying more insurance over a time period than the claim. Or simply loose all together where you keep paying and you never get the opportunity to claim.

The insurance company operates like a casino, probability is calculated so it always earns more than it looses.

[jfengel]

Insurance is hedging risk. The goal is not to make a profit; the goal is to cut your losses.

You don't "win" by dying young and getting an insurance payout. You just lose less than you would without the insurance.

If it's a bet, it's a bet you hope to lose. But in a large pool of people, the odds are that one of you will "win". Your descendants recoup the winnings, and the rest of you breathe a sigh of relief that it wasn't you.

It's not unreasonable for a company to facilitate that, with a small but reasonable profit. Obviously there is a lot of opportunity for malfeasance and malpractice, simply because there's so much money involved, but the concept itself isn't inherently bad.

Neither is a casino, necessarily, but a casino is offering only entertainment. There is no risk to you if you don't play. But in the case of life insurance (and other forms of insurance), you take that risk every day. If you're sufficiently well-off to self-insure, you shouldn't participate, because its offers no benefit. But it offers a genuine tangible benefit to those who cannot afford the risk and seek a hedge against it.

[avgcorrection]

Insurance is like reverse gambling. The only similarity is that the house always wins in the long run.

Unless your definition of gambling is so loose that not buying a lottery ticket is gambling.

[francisofascii]

Actually, insurance if done properly is the opposite of gambling for the person buying the insurance. You are paying a small fee to not have to gamble.

[giaour]

> Insurance in ANY form is gambling.

Only in the sense that both insurance and gambling charge a fee to alter the variance of a given outcome. But insurance exists to minimize or eliminate variance, whereas gambling seeks to increase it. In this sense, they are opposites.

[bilsbie]

I just saw a similar idea for a gym membership. Expensive upfront cost but you get $5 dollars back every time you work out.

[abeppu]

I think a key issue is that people that want to go the gym don't want it to be crowded. Under the current model, supposedly gyms rely on people paying memberships but not going. But also, the people that are actually there also want it to be well under capacity so they don't have to wait for equipment, etc. So even if you're really confident that you would go to the gym often enough to recoup your costs, would you want to go to a gym where everyone else has an extra motivation to go?

[nonameiguess]

It's worth considering the existing form of "reverse life insurance" that already exists, which is simply selling life insurance policies. The counterparty in a two-party bet is always the reverse bet.

Think of whether it's worth it from the perspective of the seller to insure only one person? Short answer is no, because that's extremely risky. When you sell insurance policies to thousands or millions of people instead, you can use actuarial statistics and finance the policies with bonds in such a way as to ensure you will make money, with the scale limited only to how many policies you can sell, independent of whether any specific person lives or dies.

So why is life insurance worth it from the purchaser side? Many people will argue it isn't. You're virtually guaranteed to lose money. But the argument in favor is that an early death can be disastrous to others who depend on you and can't support themselves otherwise. It can be worth losing money to gain peace of mind. But really, that is the main argument. It's not a good investment. It's protection from disaster.

The only real analog on the other side is the possibility that a person lives much longer than expected without being able to support themselves, leaving loves ones on the hook. But the best form of "insurance" against that happening is pensions, social safety nets, and the individuals themselves simply saving and investing well as long as they're still working. Whatever money you might have allocated toward reverse life insurance, just allocate toward appreciating assets that will generate income when the person you're reverse insuring stays alive.

[zosima]

Robert Louis Stevenson wrote an extremely funny novel about Tontines, which are a variant of what you suggest:

https://en.wikipedia.org/wiki/The_Wrong_Box_(novel)

Just like with life insurance, there is some opportunity for abuse...

[barbarbar]

In most cases the life insurance is for the loved ones to continue their life in a reasonable way in case you die from illness or accident. So despite they want to keep you alive that is not allways what happens. So the reverse may be "nice" but in case you die early it is a double penalty for the loved ones.

[dragonwriter]

> This would encourage your loved ones to keep you alive until you reach that age.

If your loved ones love you in return that's an incentive for them to keep you alive as long as you are deriving value from life.

If they don't, you might not want them to have an incentive to keep you alive to arbitrary age.

[Barrin92]

In France there's a practice that exists since the Middle Ages, it's called viager. You can sell a property and retain the right to live in it and get a modest down payment much smaller than in regular real estate transactions (sometimes zero), followed by monthly payments that meet your living expenses.

If you die early, the buyer gets the property for the price of the initial down payment which doesn't exceed 30% of the price, if you live for a really long time the monthly payments can easily exceed the price of the property. So effectively, it's a gamble on the lifespan of the seller.

[TowerTall]

I read a story, maybe 20 years ago, about this very old french woman that had an amazing house overlooking the ocean. A middle-aged rich guy showed up and bought the house on that conditions you mention. The woman could stay in the house until she died. This woman went on to become the oldest person in France and the guy died many years before her.

[gergesh]

I think this is what investing is. Being genuine and not snarky here, but you can put money into a pool and save it and make more back over time, whether or not it's nominally "insurance".

[hirundo]

It exists, and is known as "compound interest".

[sethhochberg]

And already something exposed to the insurance world via Whole Life policies - which are technically life insurance, but with an investment vehicle baked in. Whole life policies are typically a lot more expensive than term life, but a portion of premiums paid goes into cash value which can be invested in markets, and often tax-free.

If you die early, your beneficiaries get a bigger payout than you paid in. If you live until the end of the whole life term, you've accumulated cash value and investment income on top of it.

The "catch" is really just the expense of the premiums. Whole life is out of reach of many people shopping for life insurance, especially those looking for coverage because their financial lives are already pretty close to the edge with debts, etc.