Posted by (American Life Insurance Guide 05/12/2020 Irvine) With the development of the new crown pneumonia epidemic in the United States entering May, the American life insurance industryThe wind starts to change, The market gradually appearedInsurance premiums have risen, some products have been suspended, product interest rates have been lowered, and fringe benefits have been reduced.as well as,Refusing to insure some Americans who want to buy life insurance.
Insurance companies reject high-risk businesses
Penn Mutual Pennsylvania Mutual LifeInsurance companies have temporarily stopped selling life insurance to people over 70.
The insurance industry believes that the proportion of elderly people with underlying medical problems who die from the new coronavirus is much higher than that of young people.
On April 4th, Prudential PrudentialThe insurance company suspended sales of 30-year term life insurance policies popular with young families.This type of insurance policy mainly helps families in the stage of raising children to combat unexpected risks.At the same time, Potevio also lowered the loan interest rate of universal life insurance.
5 month 11 day,Lincoln Financial Group Lincoln LifeAdjusted the cost of its VUL and GUL insurance products.
5 month 30 day,AIG The premiums for GUL insurance of the Qol product line under AIG will also increase.
Pacific Life Insurance Company (Pacific Life Insurance Co.), Principal Financial Group Inc., and National Insurance Company (Nation-wide) These large insurance companies have also restricted GUL (Lifetime Guaranteed Universal Life Insurance) The sum assured of the policy, because this type of policy is very sensitive to the low interest rate market environment.
"The main reason for the denial of insurance is that they are older and haveChronic diseaseCustomers, they areCovid-19The resistance of the insurance company is relatively weak, which increases the risk of insurance companies and is denied insurance,” said Jc, the head of an insurance brokerage management agency in California: “Insurance companies areGuaranteed productsTake measures to increase prices,The reason is that during the epidemic, the federal government lowered the federal interest rate, making it more and more difficult for insurance companies to make profits. Therefore, there will be a tendency to increase prices in insurance products in the future."
Increase in insurance demand vs. increase in underwriting risk
on the other hand,New Coronary Pneumonia OutbreakIt has also significantly increased the demand for life insurance from American families.
Northwest ReciprocityThe life insurance company (Northwestern Mutual) stated that April 2020 was the fifth month with the best sales in the company's history.The number of new customers buying various types of insurance has increased by 4% year-on-year.
Located in MassachusettsWantong Mutual Life Insurance Company( Mass Mutual Life Insurance Co.'s term life insurance subsidiaryHaven LifeAnnounced a 3% increase in term life insurance sales in March.
althoughNew Crown OutbreakPromoting more and more families to apply for life insurance has brought market growth, but with the controversy andNovel Coronavirus OutbreakWith the development of the market, the direction of the market is beginning to change-the growing demand for insurance by American households and the gradual expansion of insurance companies’ underwriting risks are forming a huge space for contradiction.
Low interest rates lead to lower income for insurance companies
Most U.S. insurance companies haveInvest premiums in bonds to earn part of the profit, Until the customer settles the claim due.Simply put, when an insurance company designs a policy and starts to price the policy, they are assuming how much interest this insurance fee can earn from investing in bonds.
The less interest an insurance company earns from bonds, the more they need to charge higher premiums or fees to make a profit.
(Historical chart of U.S. 10-year Treasury bond yields)
As mentioned in the reportGUL insuranceAs an example,Guaranteed claims is the promise of insurance companies, and annual premiums are also guaranteed to never increase.This means that if the interest income of such investment bonds is insufficient for many years, then insurance companies will be in financial trouble.
In order to cope with the "low interest rate" situation, some traditional insurance companies, in addition to suspending sales of some popular products and raising prices, are also reducing the size of their policies or reducing additional fringe benefits.
New York LifeChief Executive Theodore Matias said: “Today’s ultra-low interest rates areLife insurance asSavingsFor Americans, Certainly not very good, but the value demand for protection will increase in this unpredictable environment. "
From the overall environment of the market andNew Coronavirus Outbreak in the U.S.In terms of development, with the gradual emergence of well-known insurance companies, their underwriting attitudes have changed.The situation of refusal of insurance, price increase, and reduction of dividends has begun to appear.The golden window for US residents to insure is closing.
The head of an insurance agency in California told a reporter from the American Life Insurance Guide, “The advice for policyholders is that if they are in good health and are considered healthy, if there is a need for insurance, they can take it as soon as possible. Take action and buy related similar products."
(>>Recommended reading:The business experience of life insurance companies during the epidemic in the United States, how should we, as consumers, choose?)
(End of full text American Life Insurance Guide Comprehensive report)
