While my crystal ball is usually as helpful as a Magic 8 Ball, lately it has been very reliable, and has shown me exactly what 2012 holds for all of us in the insurance world. Well, maybe not. But by having an ear to the ground, so to speak, I can tell you some of what will happen in early 2012, and maybe make a few predictions about the year as a whole:

Insurance prices will not be lower than they are right now. At least two carriers have let it slip that they are planning or contemplating price increases in the first quarter. I am sure they are not alone.

During much of the 2000's interest rates were reasonable, and supported a reasonable cost of reserving as well as respectable portfolio rates at the carrier level. I think we all understand the impact that an extended period of astoundingly low interest rates has on pricing. While this environment can't and won't last forever, there is always a lag time before insurance product crediting rates follow interest rates up. Considering that the GUL contracts still dominate the market, I am not sure that increased crediting rates will really get us where we need to go. Increased sales in current assumption products will more than likely cannibalize guaranteed product sales with no real reduction in actual premium costs for policy owners, and no real increase in overall premium volume.

Cap Rates on indexed products continue to fall, with at least two announcements in recent weeks of reduced cap rates and corresponding illustrative rate reductions. During the first decade of the year and even as recently as early this year the high caps and illustrative rates drove a significant volume of premium, with EIUL being one of the few growing segments in our business. While an increasingly important segment, I think there are enough concerns about long term performance in these contracts that the growth rate of this market will certainly slow. Stay tuned to The Rant in 2012 for more on this.

Most carriers are still behind the unprecedented premium volume levels achieved in 2006, 2007 and 2008. While things are certainly better than they were in 2009 and 2010, we are unlikely to hit those lofty highs again barring an unforeseen market force. How does a high level of new premium written contribute to low prices? Cash flow from new business is a huge part of the overall profitability of a carrier. Of course, in recent times, more than one carrier has decided that selling less will make them more profitable because of the poor economic environment. Selling less of higher margin products may be the dominant strategy for the foreseeable future, and that means higher prices for our clients.

So what does it all mean for us next year?

Uncertainty remains a major market force. The lack of clarity on what happens roughly a year from now when current estate tax legislation sunsets will keep many on the sidelines. The recent speculation regarding near term changes to the estate tax law certainly do not help (One note of irony - if this legislation is rolled back to 2001 levels plus a little inflation indexing and a higher top rate prior to January 2013, it just may spark a rather significant bump in premium volume with all the newly taxable estates).

Monitoring the health of in force contracts may be more important than ever. Virtually every type of policy has had significant pressure applied to it as a result of the last three years. Lower dividend rates, crediting rates and market returns have changed the future performance of every in force contract that has non-guaranteed elements. These changes do not favor the client in most instances.

I think the bottom line is that the pendulum continues to swing away from "programmed sales" and back toward actual insurance planning. While it may take a bit of pain to re-tool the shop, so to speak, getting back to the more traditional sale of insurance will not only improve your 2012 bottom line, but can also provide a bit of insulation from the vagaries of the market that programmed sales depend on.