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| The US term insurance scene is changing... |
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Over recent weeks, several US MGAs have advised their producers that as of March 16th, West Coast Life will be introducing increases to term product rates, particularly of the T-30 variety. In another example, ANICO, another US life insurer, has also announced that it will only issue their Select 30-year Term product up to a maximum of $750K (the max to include all policies in the mill or in-force with the carrier). Other carriers are also following suite with upcoming term rate increases and/or lower max assumed death risk per life. The change in direction for term insurance is in part a move responding to the "changing environment". The "changing environment" involves several components, including the current interest rate climate over the short term, investment losses and write-downs by US insurers, and the emergence of the "life settlements" securities casino (see also March 5, 2009 note about US Court decision involving "life settlements" noted here on Planner.CA). Lower interest rates, coupled with investment write-downs and losses experienced by life insurers in the US are placing an increased pressure on reserves, as well as on pricing assumptions. These matters are causing upward pressure on pricing of level term insurance for level term products in the US - particularly on longer guaranteed level premium (20 and 30 year guaranteed level premium) term products. The emergence and rapid expansion of "life settlements", including its entry into 20-year and longer level guaranteed premium term is also a notable catalytic factor to the shifting pendulum for level premium term in the US. Recent record job losses in the US, coupled with the crippling health care insurance crisis in the US, are notable factors causing an increase in the number of Americans who are prepared to sell their insurable interest to "life settlements" securities traders. The anticipated consequence to life insurers is a decline in the number and ratio of pre-maturity term policy lapses, along with an anticipated increase in the number of term insurance contracts that materialize as death claims. Canadians are not direct victims of the US health insurance structure and the "life settlements" securities casino has not (yet?) become as commonplace in Canada as it is in the US. On the other hand, interest rates are at record lows. With the shifting pricing and risk acceptance pendulum in the US and the current global investment and economic climate, it is quite possible that Canadian insurers will also re-visit their pricing of longer level period term insurance, as well as guaranteed premium permanent offerings, with a likelihood of increased premiums and/or other product revisions to reduce risk exposure. E.&O.E. |
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