JEFF REED'S
WEEKLY RANT!
Bit of Insight.....  

Awkward name, interesting idea

 

IDoneThis 

Do you know someone who should read The Rant?


Want to receive The Rant Directly?

Join Our Mailing List
Did you miss a Rant?

Small ManA 60 Year Low    

 

 

Last week we talked about one carrier's restrictions on first year premium as a result of the current interest rate and treasury yield environment. This week we take a step back from simply reporting on the impact, and start to project a bit into the future. Given that we are at a 60 year low for treasury yields and the low interest rate environment that has its roots back in 2008 continues, what can we expect to happen over the next 30 to 180 days in our business? Does the fact that we are entering the 4th Quarter impact this at all?

 

Normally, my crystal ball is filled with some sort of murky cloud, but this morning, it is clear as can be, so I know exactly what the next 180 days holds for us all! Pricing increases are certainly in our future, and I did not need the crystal ball to tell me that. The evidence is all around us in the rate changes in the annuity markets and the recently announced MoneyGuard price change.

 

This first wave of price changes is instructive. Carriers feel they need to move quickly to protect their bottom line. Even if we don't care about carrier profit margins (and if you are in this business for the long haul, you probably should care!) we need to understand the state of mind in the home offices of the carriers we represent. More importantly, we need to understand how that state of mind could impact our practices and ultimately, our clients. So how could this play out in other ways? What does the crystal ball tell me? Let's be a student of history and look back at the events from 2008 to today regarding GUL products in particular, and we see that the following are all likely:

 

  • Carriers increasing rates on GUL contracts
  • Carriers pulling out of the GUL market place all together
  • Carriers increasing GUL pricing to the point that they may as well have pulled out of the market
  • Carriers reducing guaranteed rates on any type of UL contract
  • Carriers reducing current crediting rates on traditional UL contracts
  • Carriers reducing Cap Rates on EIUL contracts
  • Carriers preferring to write LESS business in the fourth quarter rather than writing more, unprofitable business

 

Obviously, this does not paint a pretty picture for us or for our clients. There will be fewer carriers to choose from, and the cost of coverage may rise in all product lines. The question becomes what to do about it? There are a few answers, but I think the most important one is to get your clients off the fence. These changes are coming, and they will probably have very short to non-existent transition periods. Any client currently contemplating an insurance purchase, particularly if there are underwriting challenges, should consider taking action now to avoid paying higher premiums. We have a proven 4th Quarter strategy that can help you navigate these waters as we close the year. Let's roll up our sleeves and close the year strong.

Signature

Jeff Reed
President
Reed Insurance Consultancy
Marketing Consultant
Cavalier Associates
858-427-1643
jeff@cavalierassociates.com