The mortgage market crisis could hurt life insurance and annuity product performance, a LOMA researcher warns in a new report.
In addition to cutting demand for new life policies, the crisis increases the likelihood that life policyholders will borrow against policies, let policies lapse or sell policies through life settlements, Jean Gora, research manager at LOMA, Atlanta, writes.
Consumers facing household financial trouble also will be less likely to buy new annuities, contribute to existing contracts, or leave money in the contracts, Gora writes.
Continuing investment market turmoil could cause hedging costs to skyrocket, and a return to high inflation rates could cause customers to flee from fixed-rate products, Gora writes.
But Gora notes that stable-value sub-accounts in 401(k) products could do better if individual participants suffer losses in stock or bond sub-accounts.