Stable Growth Expected for Life & Annuity Sector in 2016
Experts predict 2016 to be a stable year for life and annuity products with indexed life insurance and whole life products, as well as indexed annuity products expected to grow, despite regulatory changes. Debt rating agency, A.M. Best, also issued a “stable” outlook for this sector.
One on-going challenge for the industry has been low interest rates. Some analysts, pointing to the quarter-percent increase on short-term rates last month, expect the Fed to raise rates in 2016. However, most experts believe rates will remain low for the next several years as the economy struggles to regain momentum.
According to the LOMA 2016 Annual Forecast, the lagging economy will continue to affect the industry. Brandon D. Carter, Chairman and President of USAA Life Insurance Company, and one of the contributors to the forecast, said “While the economy continues to slowly pull itself out of the recession, the interest rate environment is constraining growth.”
According to most of the panel surveyed for the report, the development of long term care products, life insurance for retirement, and deferred income annuities are all expected to see growth in 2016.
Additional issues that will bring challenges as well as opportunities in 2016:
Consumer Debt: rising debt and a lagging economy make life insurance an important issue into 2016 for younger boomers. This debt translates to less money to spend on life and health products, and younger consumers may not buy into the need for coverage without sound advice.
Disability & Long term Care: Agents have an opportunity with higher net-worth consumers, as more and more people are becoming aware of these products. However, most consumers find the rates too high. Annually, about 230,000 policies have been sold each year since 2009, down from the high of 754,000 policies issued in 2000.