I’m changing names, details, etc. in a pretty gruesome way here, to protect the candid.
But, anyhow, a candid individual — let’s call her Jane Doe — was talking to me somewhere the other day. Let’s say somewhere was an elevator, even though that’s not the case.
She suggested that a combination of low interest rates, tough risk accounting rules, and other laws, regulations and policies have forced some big, well-known life insurers to shut down all of the operations that were bringing in much new revenue. The life insurers have big blocks of business to service and little new revenue. They are, essentially, undead, just waiting for a kindly reinsurer to come along and rescue them, or for a change in economic conditions to give the life insurers to sell again.
Jane Doe was not talking about disability insurance.
But she got me to thinking: Is the Federal Reserve System in the process of turning long-term disability (LTD) insurance business into a zombie business?
In an effort to help companies and individuals that benefit from low interest rates — including, to be fair, many people with disabilities who happen to have variable-rate mortgage loans, or who happen to be using home equity loans to keep their families going — the Fed has kept rates on government bonds at very low levels for years.