I’m getting ready for the upcoming Disability Insurance Awareness Month campaign and thinking that, honestly, the real question to ask is, “So, do any insurers still want to write this stuff?”
The question lurking under that question is, “What do you think about the current low interest rates, and is there anything disability insurance units and the parent companies can or should do about the low rates?”
And the question lurking under that question is, “What do the life and health insurers actually seem to think about the low interest rates?”
It feels as if these are rude questions to ask. The people taking the questions for the disability awareness campaigns are usually the marketing people, not the actuaries or the underwriters, and they want to talk about the need for protection, not whatever strange things the folks managing the general account do.
Of course, consumers are living paycheck to paycheck, and, of course, if they think for half a second, they have huge, gaping canyons of immediate need for income protection.
But one of the challenges in the disability market is that people aware enough of disability to actively shop for individual disability coverage might be terrible risks. Even in a good year, when interest rates are high and investment portfolios generate healthy returns, the insurers might not want to touch those folks with a 10 trillion-kilometer thread of Google Fiber cable, let alone a 10-foot pole.
This year, it’s just not that particularly clear that insurers want to sell any kind of insurance that provides any kind of long-term guaranty whatsoever, except to convince Wall Street that business is peachy.
When I look in securities analysts’ reports, or ask around till I get someone who knows a little bit about disability program innards, folks indicate that the low rates hurt.
But what’s also interesting is that the insurers themselves aren’t complaining much about the low rates.
I’ve seen some analysts suggest that increasing rates could cause even more headaches than low rates.
Is the challenge that insurers with disability units are too confused to know what to think; scared to draw any attention to the topic of interest rates, because the problems caused by the low rates are so dire; or unhappy talking about the topic because, really, even though the low rates hurt the disability and long-term care divisions, and some annuity operations, the overall net effect on diverse companies as a whole is a neutral?
Or, is there some fourth answer that I haven’t thought about, and that’s the correct answer?