Moody's Offers Favorable Take On Stable Industry

The individual life market is pretty mature, according to Bazer. Premiums recently have been boosted by sales of aggressively priced universal life products and reasonable term products, she continues. However, she notes, companies are starting to reconsider how UL products are sold and a tighter reinsurance market is changing the term market. Previously, Bazer explains, readily available reinsurance lowered term insurance to the point where it was “selling off the shelves.”

Life insurance sales, she adds, will continue to fluctuate because of variance in corporate-owned life insurance and bank-owned life insurance sales, which can change depending on scrutiny from the Internal Revenue Service and case rulings on the use of the products.

Of the long term care insurance market, the Moody’s report says key factors restraining growth include complexity, product cost and a poor reputation among consumers. Although it says that recent efforts have been made to increase product knowledge, Moody’s maintains that “consumers’ need for long term coverage is still poorly understood and is not likely to improve any time soon.”

The rating agency also raises concerns about the ability of insurers to assess accurately factors that determine cost: interest rates, policy persistency, and policyholder morbidity and mortality.

LTC insurance is a product that has a lot of people scratching their heads, says Bazer. There is a general acknowledgement that there is a need for the product, she says, but the health care market still is evolving, and determining proper pricing is difficult. It is also difficult to determine how consumers will use the product including whether they will use home care or whether they will enter nursing home facilities.

Immediate annuities are one product that the Moody’s report calls “a product with prospects.” The product, which can offer a guaranteed income stream in retirement, is “an attractive feature for the annuity buyer because more Americans are living longer, and the risk of outliving their retirement and financial resources becomes more real.”

On competing with other industries such as the mutual fund industry, Bazer says insurers will need to offer a competitive fee structure and flexibility in products such as 401(k)s in order to continue to attract consumers.