Despite uncertainties in politics and the economy – and low interest rates – the U.S. life insurance industry continues to remain strong if faced with an uncertain future.
A report from Moody’s, Life Insurance Industry – US: 2017 Outlook: Low Interest Rates, Business Shifts Changes Outlook to Negative, while it predicts some potentially tough times for insurers, it does include some good news for families looking towards life insurance to protect their loved ones.
The report says the outlook for the US life insurance industry has been revised to “negative” from “stable,” and the ratings agency says the is new outlook reflects increasing pressures on life insurers’ profits. The findings revealed that due to low interest rates and key shifts in regulatory and business environments are at the core of this status change.
According to Moody’s, the low interest rate environment will tamp down “interest-sensitive” product earnings and continue to challenge industry profitability.
The report also suggests the low interest rates will “encourage more asset risk-taking as insurers reach for yield to compensate for declining investment returns.”
“Although industry balance sheets remain healthy, and holding company liquidity is strong, insurers’ non-insurance, and non-US risks will grow, as they pivot away from spread-based insurance products, toward fee-based, asset management and insurance markets with higher growth prospects abroad,” says Moody’s Vice President and Senior Credit Officer, Laura Bazer.
Moody’s says a new set of fiduciary rules which began a two-year phase-in on April 10, 2017 are likely to pressure the sales and earnings VAs and FIAs to 401(k) pension plans, plan participants, and IRA owners.
“In light of the US presidential election outcome, for now, Moody’s believes the rule will be implemented and will continue to dampen the sale and profitability of affected insurance and investment products over the next 12-18 months,” says this latest finding from the ratings agency.
Life Insurance Industry – US: 2017 Outlook: Low Interest Rates, Business Shifts Changes Outlook to Negative also notes that factors contributing to the change in outlook include increasing pressure for the insurance industry to invest in systems and processes that better connect them with their agents and digitally-focused customers.
The outlook reflects Moody’s expectation for fundamental business conditions in the industry over the next 12 to 18 months and it may mean good news for consumers.
In any kind of economy, life insurance is a sound investment for protecting one’s family, especially if there are children or dependent older adults involved.
Industry experts suggest that a person should carry insurance coverage equivalent to between five and seven times their annual income. However, again, one dependent versus five will project a different life insurance need especially when it comes to college expenses.
Calculating can be tricky, according to Kiplinger, since college costs have been rising every year.
Personal circumstances will always reflect the type of coverage that will be most appropriate for you and your family. Those that will cover mortgage costs, debt, medical conditions, education and final expenses can vary from one household to another. How many years will you need of insurance?