The current economic downturn and tight credit markets are causing problems for most financial services companies, and life insurance companies are no exception. Most life insurance companies have seen profits fall dramatically due to market conditions. As a result, capital costs have increased, and rating agencies have downgraded many life insurers. This acidic combination has caused regulators to increase the reserve requirements of the industry as a whole.
“This perfect storm has left life insurance companies with few options, and many are choosing to raise premiums in an effort to stem losses and meet additional requirements mandated by regulators,” stated Tim Bain, President of QuickQuote Financial, an Internet-based term life insurance broker (www.quickquote.com). “None of these companies wants to become the next AIG, so they are forced to take these measures.”
QuickQuote has seen premium increases from Banner Life, American General Life, Lincoln National Life, ReliaStar Life (ING), West Coast Life and Prudential in just the first four months of 2009. These rate increases have been on average of about four percent. Many life insurance companies have also increased policy fees during this same period.
While term life insurance still offers the best value in the market for pure protection, it appears rates may continue this slow increase for the foreseeable future.
“Although the trend is currently upward, we certainly don’t expect to see the significant decreases of the past ten years or so erased entirely,” said Bain. “However, now may be a better time than ever to lock in a low rate on a term life insurance policy because we just don’t know when rates will begin to fall once again.”