Two pieces of news provide a flicker of hope amid the doom and gloom.
Life insurance was the largest segment in the overall U.S. insurance industry in terms of gross written premium from 2007 through 2011 but the industry's book of business shrank during that time, according to a new report from market research firm Timetric. The report, "Life Insurance in the U.S., Key Trends and Opportunities to 2016" reviews both historical data and examines the industry’s prospects through 2016, according to a statement.
The total written premium value of the life insurance segment decreased at a compound annual growth rate (CAGR) of 0.7 percent during the review period. “Life Insurance in the U.S., Key Trends and Opportunities to 2016" examines written premiums, incurred losses, loss ratio, commissions and expenses, and also analyzes the various distribution channels for life insurance products, according to the publisher’s statement.
A separate financial analysis prepared by SNL Financial reported that while industry revenue grew by 8 percent between 2010 and 2011, it has been nearly flat over the five-year period. Revenues totaled just over $815 billion in 2007, grew to $844.7 billion the following year, then slipped during the financial crisis before rebounding to $835 billion in 2011.
Net income declined 8.8 percent between 2010 and 2011, and at $14.4 billion in 2011 was slightly less than half of 2007's $31.6 billion, according to SNL Financial.
The decrease is attributed to high levels of unemployment, which depressed the demand for group life insurance products and the uncertain economic environment, which resulted in a decline in gross written premiums in the term life category, researchers found. In addition, the low investment returns due to low interest rates represented losses to the earnings of life insurers.
Other industry watchers have said life insurance companies face a broad array of headwinds, from the demographic to the financial. Accounting giant Ernst & Young's 2013 industry outlook noted, "Insurers are competing in a market where average household expenditures on life insurance have declined 50 percent over the past decade." Deloitte, another large accounting firm, issued its own pessimistic U.S. life insurance predictions for the year: "With millions still out of work or underemployed, and many more focused on repayingdebts, a lot of consumers have shorter-term financial priorities to worry about other than life or annuity protection."
In September, bond rating firm Moody's slapped a negative ratings outlook on the life insurance sector, primarily due to continued low interest rates and their effect on corporate earnings.
Priced at $1,950, the Timetric report is available through Fast Market Research, an online aggregator and distributor of market research and business information.
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