Life Insurance Rates Rising According to WSJ—The Other Side of the Story.
Nov 4, 2009
Jamie Fleischner

Jamie Fleischner

4 Nov, 2009

Blog post by Jamie Kantor Fleischner, CLU, ChFC, President of Set for Life Insurance by KF Financial, Inc.  Greenwood Village, CO.

Here is an interesting blog post written by the editor of LIFE (Life Insurance Foundation for Education). It remarks on a recent blog post I wrote about a Wall Street Journal article about Life Insurance.

The Wall Street Journal ran an article recently titled “In a Crunch, Insurers Raise Fees, Trim Sales.” It was a story that we at the LIFE Foundation took exception to because writer Leslie Scism only tells half the story of what is going on in the life insurance marketplace.

First, while true that some insurers have raised rates, it’s important to note that life insurance is still dirt cheap. Even with recent price increases, insurance costs are still near historic lows-down about 75% since 1990, according to Accuquote. Reasons? More sophisticated underwriting, stiff competition in the marketplace, the rise of Internet sales, etc. So yes, some insurers have raised rates but without this context Wall Street Journal readers don’t get a true sense of where prices stand today. This should help: a healthy 35-year-old can buy a 10-year, $250,000 term life insurance policy today for less than $200 a year, or about 50 cents a day. That’s a lot of financial security for very little.

Ms. Scism also gives readers the impression that life insurance sales are plummeting. She cites data from LIMRA International, a leading industry research firm, which reported a 23% decline in sales for the first half of 2009. This number needs to be explained. LIMRA calculates industry sales of annualized premium year over year. While the amount of premium sales is down appreciably, policy sales have fallen at a much lower clip-a rate that more closely reflects a 30-year trend, and less a reaction to the economic crisis. According to conversations we’ve had with company executives and agents, people are still buying life insurance, but they’re buying smaller policies. People are also holding onto their policies. Mutual insurance companies and direct sellers of term insurance tell us sales couldn’t be better. These are companies that make life insurance sales a priority.

Consumers continue to buy and hold onto life insurance because they understand it’s essential to a family’s financial security. But Ms. Scism reports that sales are down in part because some view life insurance as a “nonessential purchase.” There is a mound of data to suggest that consumers have, and continue to think, life insurance is an “essential” purchase. A national survey conducted by the LIFE Foundation found that 93% of adult Americans felt that it was important for most people to have life insurance coverage. That was last year. Just a few weeks ago in another LIFE survey, 56% of adult Americans said the economic downturn has made it more important to have life insurance. ONLY 9 percent said the need had diminished.

Moreover, the survey found that a majority of Americans with life insurance coverage, 71 percent, have not made changes to their coverage over the past year. Of those who did, 39 percent had INCREASED existing coverage, and 28 percent bought life insurance for the first time. Read more about our August 2009 survey.

LIFE’s not the only group to report these consumer attitudes. In its “The Value of Life in Tough Economic Times,” released this month, Prudential Financial found that 93% of consumers consider life insurance a “must,” while 84% considered the cost of life insurance relatively minimal when compared to other household expenditures.

To get an accurate read of what is taking place in the life insurance marketplace, it’s important to look at all the factors that contribute to the data and base conclusions on the broader context. In other words, Wall Street Journal readers would have benefitted from learning the whole story, not half of it.

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