Term Life Insurance Articles
First Half Of 2009 Experiences Worst Drop In Life Insurance Sales In 70 Years
2009-09-30
Life insurance companies are feeling the pinch of a tanking economy and they are beginning to cut back in every area they can. Term life insurance providers are using the same tactics that banks used when the economy went south: raising rates, reducing lending, and moving toward more conservative investment vehicles. The loss of benefits and elimination of certain riders in term life insurance policies have become a boon to insurance companies trying to recover an estimated capital loss of $9 billion. Companies are not just raising fees and eliminating riders on a term life insurance policy, but in some cases companies have eliminated the entire living guaranteed benefit for those who are survived by the insured.
After seeing a 23% decline in sales as compared to last year, companies are pulling out all the stops to make sure they can retain as much capital as possible. Because companies pay commissions to the life insurance salesman and, in some states, they have to set up reserve accounts for claims that come early in the policy's life, companies are making much less intense sales pitches in order to save themselves from paying outlandish commissions that they feel they cannot afford. Ann Perry, an analyst from Moody's, is quoted as saying that some companies are willing to let their sales fall for "a quarter or two" if it means that they can regain capital in the process.
Also taking a hit are buyers who have pre-existing health conditions, such as hypertension and obesity, along with those buyers who are regular smokers, or buyers who need more complicated policies which have seen rate increases in the mid-teens. The hard line on pre-existing conditions or more complicated policies drastically raises the price of a policy, thus giving the companies an assurance that they will have a chance to profit from the policy. The insurance companies are poised to do anything they can to build up their cash reserves.
Because insurers are re-evaluating their level of risk, some have bowed out of extremely competitive markets in favor of more conservative investments that guarantee greater return. Also, "table shaving", a practice whereby an insurer grades the insured's health better than they otherwise would has seen its last days. "Table shaving" used to mean savings for many term life insurance customers, but now those buyers' policies have risen greatly in price. As competition eases in some markets, the companies that are left may choose to raise their prices to take advantage of the lack of competition, and in doing so, raise the capital they feel they need to survive.
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Life insurance companies are feeling the pinch of a tanking economy and they are beginning to cut back in every area they can. Term life insurance providers are using the same tactics that banks used when the economy went south: raising rates, reducing lending, and moving toward more conservative investment vehicles. The loss of benefits and elimination of certain riders in term life insurance policies have become a boon to insurance companies trying to recover an estimated capital loss of $9 billion. Companies are not just raising fees and eliminating riders on a term life insurance policy, but in some cases companies have eliminated the entire living guaranteed benefit for those who are survived by the insured.
After seeing a 23% decline in sales as compared to last year, companies are pulling out all the stops to make sure they can retain as much capital as possible. Because companies pay commissions to the life insurance salesman and, in some states, they have to set up reserve accounts for claims that come early in the policy's life, companies are making much less intense sales pitches in order to save themselves from paying outlandish commissions that they feel they cannot afford. Ann Perry, an analyst from Moody's, is quoted as saying that some companies are willing to let their sales fall for "a quarter or two" if it means that they can regain capital in the process.
Also taking a hit are buyers who have pre-existing health conditions, such as hypertension and obesity, along with those buyers who are regular smokers, or buyers who need more complicated policies which have seen rate increases in the mid-teens. The hard line on pre-existing conditions or more complicated policies drastically raises the price of a policy, thus giving the companies an assurance that they will have a chance to profit from the policy. The insurance companies are poised to do anything they can to build up their cash reserves.
Because insurers are re-evaluating their level of risk, some have bowed out of extremely competitive markets in favor of more conservative investments that guarantee greater return. Also, "table shaving", a practice whereby an insurer grades the insured's health better than they otherwise would has seen its last days. "Table shaving" used to mean savings for many term life insurance customers, but now those buyers' policies have risen greatly in price. As competition eases in some markets, the companies that are left may choose to raise their prices to take advantage of the lack of competition, and in doing so, raise the capital they feel they need to survive.
