NEW YORK–As the 2010 Ernst & Young/National Underwriter Life Executive Conference drew to a close Thursday, Steven N. Weisbart, a senior vice president and chief economist for the Insurance Information Institute, provided some key observations that spell out the biggest challenges facing the L&H industry for the next five years.
Relying on a wide array of data, Weisbart compared the effects of the Great Recession to other recent recessions in 2001, the early 1990s, the early 1980s and the 1970s. Across the board, it became clear that the effects of this most recent recession is making an impact on the financial realities of life and health insurance customers in ways that are different from previous recessions. This means that the L&H industry has some rethinking to do if it means to continue growth in what will be a moribund sales environment until 2015.
To that end, a major obstacle erected by the current recession is diminished buying power, marked by slow income growth (which in many cases is completely negated by current rates of inflation) and high unemployment, Weisbart said.
Real GDP always broke 3% immediately following every other recession since the 1980s, Weisbart noted. Right now, median projected growth according to Blue Chip Economic Indicators, an economic surveying firm, project just under 3% for the next five years.
As for unemployment, numbers are holding steady at 9.6%, but comprehensive unemployment figures, which include those who are no longer even looking for work, is up around 17.6%. More importantly, the variance between these unemployment figures is several points higher than it is relative to other recessions, underscoring just how badly joblessness will continue to drag on economic recovery, he said.
To prove the point, Weisbart noted that there are currently over six million people considered long-term unemployed, whose joblessness benefits are soon to expire. Furthermore, it will take at least two years for job levels to reach their pre-recession levels, Weisbart said.