Term Life Insurance Use Case from Freakonomics

Here is a use case from the Freakonomics book that illustrates the opportunity of price correction for insurance when pricing is transparent and a software application makes comparison simple.

http://books.google.com/books?id=LkQPOSXMUscC&printsec=frontcover&dq=freakonomics&ei=KuvASb7qOYzckQSo3vD3Dw

In the late 1990s, the price of term life insurance fell dramatically. This posed something of a mystery for the decline had no obvious cause. Other types of insurance, including health and automobile and homeowners' coverage were certainly not falling in price. Nor had there been any radical changes among insurance companies, insurance brokers, or the people who buy term life insurance. So what happened?

The Internet happened. In the spring of 1996, Quotesmith.com became the first of several websites that enabled a customer to compare, within seconds, the price of term life insurance sold by dozens of different companies. For such websites, term life insurance was a perfect product. Unlike other forms of insurance--including whole life insurance, which is a far more complicated financial instrument--term life insurance policies are fairly homogeneous: one thirty-year, guaranteed policy for $1 million is essentially identical to the next. So what really matters is the price. Shopping around for the cheapest policy, a process that had been convoluted and time-consuming, was suddenly made simple. With customers able to instantaneously find the cheapest policy, the more expensive companies had no choice but to lower their prices. Suddenly customers were paying $1 billion less a year for term life insurance.