Standard & Poor's (S&P) projects life insurance sales to grow 2 percent per year through 2008, down from 7 percent in 2006. This projected drop can be attributed to once strong sales of investor-owned life insurance (IOLI) and stranger-originated life insurance (STOLI) that could hamper future profits of the life insurance industry. When life insurance policies are underwritten, carriers often assume a certain percentage will lapse without payment, but with IOLI and STOLI, policies are more likely to be cashed in because they are used as investments. S&P analysts also note life insurers will come under increasing profit pressure from lower interest rates, tighter credit spreads, and lower private-equity investment payouts. The firm recommends life insurers bolster their growth through the sale of universal life insurance with secondary guarantees and other risky products with higher lapse rates.
IOLI Could Hurt Life Insurers' Future Profits: S&P
Summary:
National Underwriter (Life and Health Financial Services Edition) (12/18/07)
