As the table below shows our prices are very competitive.

Price comparison 14 May 2012

Level Term, £100,000 over 20 years, non-smoker.

	Age 34		Age 44		Age 54
	Male	Female	Male	Female	Male	Female
Payingtoomuch.com	£5.98	£5.01	£11.41	£9.75	£28.70	£24.10
comparethemarket.com	£6.37	£5.34	£12.18	£10.27	£31.70	£26.26
gocompare.com	£6.37	£5.34	£12.18	£10.27	£32.35	£26.26
confused.com	£6.40	£5.36	£12.11	£10.41	£32.20	£26.36
More Th>n	£6.52	£5.47	£12.46	£10.72	£33.55	£27.42
ASDA	£6.84	£6.00	£13.37	£10.90	£33.60	£27.88
Sainsburys	£6.91	£5.63	£13.50	£10.96	£35.55	£27.88
TheAA.com	£7.69	£6.36	£15.99	£12.43	£40.08	£31.53
Tesco Bank	£7.74	£7.13	£15.09	£13.19	£47.22	£34.44

Level Term, £200,000 over 20 years, non-smoker.

	Age 34		Age 44		Age 54
	Male	Female	Male	Female	Male	Female
Payingtoomuch.com	£9.97	£8.07	£19.57	£16.80	£54.40	£46.00
comparethemarket.com	£10.64	£8.61	£21.35	£18.33	£58.45	£48.35
gocompare.com	£10.64	£8.61	£21.35	£18.33	£60.15	£49.86
confused.com	£10.68	£8.65	£21.02	£18.04	£61.20	£51.97
More Th>n	£10.88	£8.81	£21.84	£18.75	£64.00	£53.71
ASDA	£11.78	£9.48	£23.90	£19.80	£64.00	£54.40
Sainsburys	£11.78	£9.79	£23.78	£21.01	£68.16	£61.31
Tesco Bank	£14.15	£12.47	£29.37	£22.74	£94.59	£68.68
TheAA.com	£15.17	£12.22	£30.04	£23.98	£75.27	£59.35

So how can payingtoomuch.com be so competitive?

The answer lies in the detail of how the price of a life insurance policy is constructed by the insurance companies, and what commercial strategy the distributor brand is following, (e.g. customer first or corporate profit first).

How are life insurance premiums calculated?

1. The risk charge
The premium has to cover the risk charge; that's the chance that the policy might have to pay out. This is known as the mortality premium. In reality the insurers are all using broadly the same actuarial (or calculation) base to start from and whilst there are minor differences of opinion, these are small and don't affect the premium comparisons a great deal.

2. Administration and Capital
Next the life insurance companies need to make a charge for their administration and profit. Here there are wider differences as some companies are efficient and others less so. Also the insurance company's appetite for the business plays a key role too as some may be capital constrained and others flush with cash. Placing a life insurance on risk for a customer requires that the insurance company places a little capital to one side. Therefore the companies with less capital will price higher for this segment of the cost.

3. Cost of Sale (or Commission)
Finally the insurance companies need to get their product to market, they need to include a cost of sale, or commission as it is better known in financial services. This is where distributors, (like all those named above), play the biggest role in the retail price.

Distributor commission makes up around 25-35% of the "maximum recommended retail price”, (the price the underlying insurer would normally sell at).

Crucially the distributor (like payingtoomuch.com) then has the choice to "rebate” some of this commission back to the customer in the form of a premium reduction, if they want to.

It's all down to the distributor costs and corporate strategy
In summary, the reason the same underlying insurers can appear to have different prices is all down to the amount of distributor costs (or commission in other words) embedded in the price.

The underlying price for the risk and management of the policy is more or less the same by insurer, as are the policy terms and conditions.