Life and Disability
Sales of individual life insurance products decreased dramatically in the first half of 2009. LIMRA's1 survey of individual life sales estimated that sales have decreased by 23% year-over-year. The survey indicated that all four individual life products – term life, universal life, whole life and variable life – experienced declining sales, with variable life (policies backed by insurance-dedicated mutual funds) experiencing the greatest decline2. Given the depth of the recession, these results are not surprising or unexpected.
On the other hand, because of 2001 mortality pricing that recognizes longer life expectancies, life insurance products continue to be priced competitively. Those that offer guarantees to cash values and death benefits were proven to be predictable diversification vehicles, especially given the market volatility of the last 12 months. Level term life insurance continues to be a popular product in funding corporate needs such as key person and buy/sell funding, as well as for supplementing group life insurance plans.
Capital has slowly begun to flow back into the life settlement markets, and we are seeing more activity with institutional buyers making offers on unwanted life insurance policies.
The financial stability of our insurance carriers continues to be a major topic of discussion with our clients in the current market. We continually monitor the ratings of our major life and disability insurance companies. As a matter of practice, we provide financial analysis that includes current ratings for all of the life insurance companies we quote for our customers.
Our prediction for 2010 is that carriers may continue to adjust their pricing upwards on products to make up for capital losses, given the market influx over the last 12 months. Also, before 2010, expect announcements on the current federal estate tax situation. The federal estate tax is scheduled to be repealed in 2010 for a period of one year. We anticipate that Congress will keep the current 2009 "at death" exemption levels at $3,500,000 per person, and a 45% top estate tax rate. With Congress busy on health care reform, it is anyone's guess as to what's in store for 2010.
1LIMRA is an educational and advisory body to the financial services industry
2Shift in Term Life Insurance, November 2009, Conning Research & Consulting, Inc.
