Product Redesigning: In an effort to navigate the current low interest rate environment, industry players are finding new solutions and ways to maintain their sales and profitability. Nonetheless, with the Fed already raising rates twice this year and more on the horizon, life insurers, being the direct beneficiary of an improving rate environment, are poised to benefit.
Thus, they have been directing their funds into alternative investments like private equity, hedge funds, and real estate, among others, to counter the challenge. In times of persistently low interest rates, life insurers' income from investments becomes insufficient to meet the contractually guaranteed obligations of policyholders, which cannot be lowered. A favorable interest rate thus impacts life insurers' earnings, capital and reserves, liquidity, and competitiveness positively. Story continues 3 Trends Shaping the Future of the Life Insurance IndustryĪ Rising Rate Environment: Given their rate-sensitive products and investments, an improving interest rate environment benefits life insurers. The industry has also been witnessing accelerated adoption Rising mortality may impact the profitability of these life insurers. Increased vaccinations and an encouraging economic growth outlook instill confidence. Life Insurance & Annuities Market is expected to grow 2.5% in 2022. Per a report by IBISWorld, the $909 billion U.S.
With a rise in the number of baby boomers, demand for retirement benefits is increasing. The industry also includes companies providing wealth and asset management solutions. Sales benefit from the increasing demand for protection products. The products include annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements, and long-term healthcare policies. The Zacks Life Insurance industry comprises companies that offer life insurance coverages and retirement benefits to individuals and groups. However, with accelerated digitalization, expenses should continue to increase. Also, with an improving rate environment, life insurers are poised to benefit as they invest a large portion of their premiums. It is also expected to drive premium growth and boost the efficiency of Lincoln National Corp., Reinsurance Group of America Inc., Voya Financial, American Equity Investment Life Holding, and Brighthouse Financial Inc.
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