According to S&P Global Market Intelligence’s U.S. Insurance Market Report: Life and Health, a variety of forces are expected to lead to a 1.2 percent decline in combined U.S. life, annuity, and accident and health direct premiums this year. Experts say uncertainty in the market is the main driver: As companies scramble to outmaneuver each other in the face of changing regulations, direct premiums are dropping.
“Competition for market share between life insurance carriers is highly competitive at the moment,” says Anthony Martin, owner of Choice Mutual, a burial insurance agency based in Citrus Heights, California. “That’s caused a number of carriers to continue to reduce premiums, primarily on their term life insurance portfolios.”
Here’s what you need to know.
Life Insurance: Competition Drives Down Costs
Life insurance rates are decreasing for three main reasons, Martin says: First, people are living longer, largely due to advances in health technology. Secondly, underwriting advancements have resulted in improved risk assessments, meaning insurance companies can offer insurance at a lower price, he says.
The third reason may be the most dramatic: Wider access to better technology has increased competition among life insurers. “Life insurance companies can no longer exist in a bubble,” Martin says. “All their rates are public, all the information about their programs is online in a variety of places, policies can be purchased without the need to meet face-to-face with an agent, questions can be answered instantly, and service can be done anywhere, anytime.”
Health Care: Short-Term Uncertainty, Long-Term Increases?
Consumers should be aware that the primary driver of health insurance premiums — the cost of health care itself — hasn’t been addressed, says Joel Ohman, a certified financial planner and founder of MedicareInsurance.com, an insurance comparison site based in Tampa, Florida. As a result, those costs continue to increase, and health premiums are likely poised for continued growth.
Subsides may provide short-term relief, he says. “Despite the unattractiveness of the open exchanges to many insurance companies tired of losing money, the federal government does have significant funding allotted to subsidize the premiums of many Americans who qualify for these benefits,” Ohman says. “Unless the structural issues related to soaring health care costs are addressed, then the long-term outcome is very uncertain.”
What’s Next Is Unclear
Both life and health direct premiums seem to be in a state of flux, with long-term implications yet to emerge. The new proposed fiduciary rule and acquisitions in the industry have introduced uncertainty in the market, for example, making it difficult to determine whether this year is the start of a trend.
Unpredictability is rampant in the health insurance market as well, as the Trump administration spars with Congress over repealing, replacing or modifying the Affordable Care Act, also known as the ACA or Obamacare. “Uncertainty seems to the primary driver for rate increases at the moment for individual health care, as removing government subsidies has been floated in Washington as a means of replacing the ACA,” says Sam Price, an independent insurance broker and agent with Assurance Financial Solutions in Birmingham, Alabama.