According to Towers Watson's 30th survey of life insurance CFOs in spring of 2012, “Life insurers have been under significant financial pressure as the result of the continuing low interest rate environment, particularly those with significant exposure to fixed-rate products. In fact, the current environment is their primary business concern.” Almost half (45%) of the respondents view a prolonged low interest rate environment as the greatest threat to their business and they do not expect the situation to improve quickly. Over two-thirds say they expect a three- to five-year period of low interest rates, followed by a gradual increase
With significant pressure during this time of low interest rates “most CFOs are considering implementing multiple new strategies as a result of the low interest rate environment, including dramatic changes such as ceasing sales or exiting a product line.” The pricing of all products is a function of costs and interest. When it is harder to make money on the interest side of the equation, the only options often become increasing costs or exiting the market altogether.
43% of respondents say the language in their policy forms allows them to change cost of insurance (COI) rates based on revised future expected investment earnings. If you(r clients) do not know what they are paying for cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., M&Es) and premium loads in their life insurance policy holdings now, then there will be no way to know if or when such policy expenses are increased. Now is the time to find out.
INSPECT WHAT YOU EXPECT! Use a Veralytic Research Report to measure policy expenses and know if a particular insurer is increasing or decreasing policy expenses. In order to fully assess the impact of recent changes on your clients’ permanent life insurance portfolios, or to establish a baseline by which to judge the impact of future shifts in cost, request a Veralytic Research Report now. Just fax the detailed expense report along with the policy illustration toll free to 800-409-3222 or email to firstname.lastname@example.org to request a Veralytic Report for your client's policy. If the policy illustration is not available, download a sample Request for Information (RFI) letter to gather the necessary policy information.