The Wall Street Journal recently ran a prominent article about COVID-19, low interest rates and investment market turmoil reducing U.S. consumers’ access to life insurance.
Some life and annuity distributors post streams of copyrighted, for-financial-profesisonals-only carrier product announcements on the web. The streams are shielded from general public eyes mainly by the fact that members of the general public aren’t typically scouring the web for glimpses of carrier product announcements. Those announcements show that many carrier have been lowering crediting rates on annuities and limiting or eliminating the sale of benefits guarantees.
Susan Neely, president of the American Council of Life Insurers, appeared to be referring to the Wall Street Journal Tuesday, when she said, during a webinar organized by the National Association of Insurance Advisors, that she believes life insurers are assessing the risks but want their protection products to be as widely available as possible.
(Related: Life Sales Look Great: ACLI President)
So, what’s really happening to product availability? Are the changes leaving life and annuity product shelves as bare as the hand sanitizer section at the big drug stores looked in mid-March, or just a bit picked over, like the dish soap section at the supermarket?
One clue that plenty of life and annuity products still exist is sales: Neely said she’s heard informal reports that life insurance sales at many life insurers are now up about 30% to 50%.
LIMRA recently released some results from a survey it conducted with help from the Society of Actuaries and Oliver Wyman.
Members of the survey team asked life insurers about their concerns related to “COVID-19 and recent market conditions,” and about the steps the participating insurers have taken.
Here’s a look at some of what the participants told the survey team:
- 89% have concerns about the pricing and profitability of new business.
- 60% have concerns about reserves and capital.
- 37% have concerns about liquidity.
- 30% have changed product guarantees.
Chief executive officers and chief financial officers from big, publicly traded life insurers have told securities analysts, during public conference calls, that their companies are reducing crediting rates, increasing prices for new life insurance policies, taking advantage of policy- provisions that let them increase prices for in-force policies, and favoring the sale of products that limit their exposure to market risk, such as variable life insurance policies, and “buffer annuities,” or annuities designed in such a way that the insurer protects the holder against only a portion of account value investment losses.
Mike Kalen, chief executive officer of Covr Financial Technologies — a digital brokerage general agency that helps banks, credit unions and other financial institutions sell life insurance, disability insurance and long-term are insurance — said in an email interview that conditions have changed dramatically as a result of the pandemic.
Before the pandemic, for example, applicants completed only about 10% of applications electronically, Kalen said.
Now, he said, consumers are submitting about 60% of their applications electronically.
The shift toward electronic application systems ”increases the speed of getting a policy in hand greatly,” Kalen said.
Kalen said he thinks the level of life and annuity product access depends on a consumer’s age and health.
“If you are young (under 60) and generally healthy and you need up to $3m of insurance, you have plenty of choices,” Kalen said. “Prices have come down dramatically over the last five years and the steps to get insurance have gotten much easier. You can generally qualify for best rates without seeing a doctor and get your policy within days, versus months [before].
“Prices have increased slightly in the last two months, but life insurance is still cheaper and faster than iin the past. It’s now very likely that, if you are in this class, you can get your policy without a medical exam.”
Companies like Covr and its competitors can get top prospects covered quickly with help from online applications systems, and from programs that replace in-person paramedical exams with use of electronic health record data, Kalen said.
Meanwhile, “if you are older (above 70) or in a health class that could be more severely affected by the COVID virus, you will find it harder to get life insurance today,” Kalen said. “Pre-existing conditions related to heart disease, diabetes, etc will make it harder to qualify for insurance, as insurance carriers have had to make changes to their underwriting to protect from anti-selection. However, supply still exists and good advisors will be able to find you coverage.”
In the annuity market, buyers ”can still get annuities, but the benefits are lower,” Kalen said.
Because of the effects of falling interest rates, annuity benefits have come down about 5% to 10% in the past two months, Kalen said.
“These policies still offer valuable benefits, like 100% protection of your principal and offer interest crediting rates that are well above rates paid in savings accounts and CDs,” Kalen said.
— Read Prudential Shifts Focus to Variable Life and Buffered Annuities, on ThinkAdvisor.