Death claim (settlement) options -- proceeds left at interest

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What interest rates are you seeing with settlement options for death claims (where you "temporarily" leave the proceeds with the insurance company at a stipulated/guaranteed interest rate -- which is guaranteed for the year, and then re-calculated on settlement anniversary)? The interest rate was always very favorable -- when interest rates were at all-time lows, LOL -- but I don't see them going up at all.

I had one death claim with Mass Mutual in 2021 and the interest rate was 4.5%. Guardian was at 4%. Now interest rates have gone up substantially, but neither company moved. OK, I get it. However, in the past I've seen the increase. Thanks.
 
What interest rates are you seeing with settlement options for death claims (where you "temporarily" leave the proceeds with the insurance company at a stipulated/guaranteed interest rate -- which is guaranteed for the year, and then re-calculated on settlement anniversary)? The interest rate was always very favorable -- when interest rates were at all-time lows, LOL -- but I don't see them going up at all.

I had one death claim with Mass Mutual in 2021 and the interest rate was 4.5%. Guardian was at 4%. Now interest rates have gone up substantially, but neither company moved. OK, I get it. However, in the past I've seen the increase. Thanks.

I think it shows how little faith carriers have in the current rates being sustainable.

The Fed has lost all credibility imo with this hard landing of QE unwind combined with raising rates.

Unwinding of QE is not being given enough credit, imo, for rising rates.

But they can flip the switch on that tomorrow if they want. And many feel they will if the market crashes enough.

Carriers are not going to raise rates too much if they dont feel they will stay there. Short term products like MYGAs, sure. But look at all the "long term" areas of the biz. Very little movement. I think Guardian was the only carrier to increase their Dividend for this year. And it was just brought in line with the other top 5.

Im not sure how often those settlement rates "renew", but if its annual, Id bet they just dont trust the rate environment.

Also, they are still trying to make up losses for rates being artificially low for so long.
 
I think it shows how little faith carriers have in the current rates being sustainable.

The Fed has lost all credibility imo with this hard landing of QE unwind combined with raising rates.

Unwinding of QE is not being given enough credit, imo, for rising rates.

But they can flip the switch on that tomorrow if they want. And many feel they will if the market crashes enough.

Carriers are not going to raise rates too much if they dont feel they will stay there. Short term products like MYGAs, sure. But look at all the "long term" areas of the biz. Very little movement. I think Guardian was the only carrier to increase their Dividend for this year. And it was just brought in line with the other top 5.

Im not sure how often those settlement rates "renew", but if its annual, Id bet they just dont trust the rate environment.

Also, they are still trying to make up losses for rates being artificially low for so long.

That's it. Hit the nail on the head! Most of the big mutuals guarantee for a year, so it's annual. Why not move to 5 and take the hit for the year IF the Fed lowers rates. I don't get into all the banter about if and when and how they will lower rates. I leave that to the economists, experts, and the people who think they're experts, LOL.

Separate and distinct from the dividend, I think the big mutuals are seeing/viewing this more clearly than before as an opportunity to "capture" and "retain" assets. When rates were artificially being kept above zero (LOL), I had a $11m death claim. The client(s) had already said they had no plans with the money, didn't want to invest it (at that time, it was a down year in the overall markets), was worried about the market, etc. We ended up leaving the proceeds with the company at 4%. That gave me one year to talk to them, listen to them, learn from them, and educate them. At the end of the year, the rate stayed at 4% which was still very good at the time.

In the end, I was able to transition monies over the course of time to one of our investment consultant/companies. Excellent timing! LOL.
 
That's it. Hit the nail on the head! Most of the big mutuals guarantee for a year, so it's annual. Why not move to 5 and take the hit for the year IF the Fed lowers rates. I don't get into all the banter about if and when and how they will lower rates. I leave that to the economists, experts, and the people who think they're experts, LOL.

Separate and distinct from the dividend, I think the big mutuals are seeing/viewing this more clearly than before as an opportunity to "capture" and "retain" assets. .

Agreed.

Dividends are their main "marketing rate".

New business does not take a hit from having a low DB settlement rate.

Same, to a lesser extent, with the PDA & DCA accounts. Carriers will run a "limited time marketing rate". But overall there has not been a huge move up on those rates. Why not? Imo because they can... meaning they dont have to in order to stay competitive. And when we are talking billions of dollars, those small percentages add up.

Stay competitive on new biz. Tighten the belt wherever else possible.

1 year of higher interest rates really does nothing to help stabilize the industry.

And I dont think carriers expected such a huge spike in rates. The Fed had predicted a "gradual" increase.... but gave us a sudden spike instead. Carriers were not prepared. (banks too)

I think a big reason IUL Caps have not increased as many expected is due to attrition and being stuck with long term bonds they are forced to sell at a discount. Prior to the rate inversion, they could sell those bonds at a premium.... now its a loss... and a growing loss at that.
 
Agreed.

Dividends are their main "marketing rate".

New business does not take a hit from having a low DB settlement rate.

Same, to a lesser extent, with the PDA & DCA accounts. Carriers will run a "limited time marketing rate". But overall there has not been a huge move up on those rates. Why not? Imo because they can... meaning they dont have to in order to stay competitive. And when we are talking billions of dollars, those small percentages add up.

Stay competitive on new biz. Tighten the belt wherever else possible.

1 year of higher interest rates really does nothing to help stabilize the industry.

And I dont think carriers expected such a huge spike in rates. The Fed had predicted a "gradual" increase.... but gave us a sudden spike instead. Carriers were not prepared. (banks too)

I think a big reason IUL Caps have not increased as many expected is due to attrition and being stuck with long term bonds they are forced to sell at a discount. Prior to the rate inversion, they could sell those bonds at a premium.... now its a loss... and a growing loss at that.

I was referring to the companies viewing it as an opportunity to capture/retain assets via AUM. Not for the life business, although any retained dollars are available. I've seen the big mutuals start to "pay more attention" to their non-life and what they used to call non-core business lines. Their B/D, RIA, AUM, investment, or whatever business is starting to make a lot more sense now, LOL.
 
I have never had a bene take that option. Do they get a 1099 for the interest? Or is it still all income tax-free?

It is taxable from funding forward. Even interest earned from the date of death in most instances is taxable from day one, but there are exceptions (wink wink, LOL). Regardless, from funding forward they will issue the 1099.
 
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