A few weeks back I mentioned that there were price changes coming.  Two more carriers announced increases in the past two weeks......and the rest will no doubt follow suit. 

We have already explored the "why" part of this and focused in on the current economy as the culprit.  This week's move by Bernanke is probably not going to do the insurers any favors in the near future, and only time will tell regarding long term effectiveness.  That leaves most insurance companies with only one question left to answer - when do we change our prices?

That makes me think of the classic movie scenario where everyone takes a step back and some poor kid who did not move finds himself volunteered to be torn limb from limb by jackals or something equally horrible.  I am here to tell you that there is no way that an insurance company is going to let the rest of the market move without knowing exactly what they are doing.  The ramifications of being the last one to move are too serious

What we really need to do is consider the motivation.  I think we can all agree that under normal circumstances insurance companies need new premium dollars to remain profitable.  We have even pointed out that some carriers may knowingly offer unsustainable terms in an attempt to attract premium dollars (think really high cap rates on an EIUL, for instance).  So my first question is "are these normal circumstances?"  In a word, no.  The recent price increase by John Hancock has effectively priced them out of the market, and they may end up being more profitable in the short run as a result!

For the carriers that have not yet increased their rates, it is now a matter of timing.  The basic decision is between getting it over with now (and seeing the commensurate dip in new premium until the remaining carriers also adjust rates) or waiting (and experiencing a bump in premium volume from being among the last to move).  Given the strange economic times and the hyper-scrutiny of short term earnings at the corporate level, it is going to be very interesting to watch the next few months play out. 

My guess?  A process that would normally take the bulk of the year to play out will play out on a compressed time frame.  Our challenge is to make sure our clients are not caught paying higher premiums by waiting to take action on their insurance planning.

A good Friday to all of you.