Is The Final Expense Industry Secretly Being Monopolized?...

[Allen Trent]

As far as the low interest rates; that's nothing new, rates & earnings have always fluctuated since the dawn of the stock market

very little to none of insurance carriers money can be invested in the stock market. Almost all of it is invested in Treasury bills, commercial mortgages, bonds. Those were paying almost nothing for 10-15 years, so carriers should have been raising their rates to offset, but with most FE sold by independent agents, FE carriers have to attempt to have low rates, high commissions, good technology. Those are all very costly. Plus, add in the target market of older unhealthy consumers & I see a math problem of how any one could be profitable long term, especially in low interest rate environment & high tech/vendor costs(script checks, med billing checks, e-apps, etc)

 

[FETalk]

I was merely using the term stock market to "loosely" relay a point that there have always been ups and downs in various markets.

However, that being said, there is still a correlation between the profitability of bonds & real estate and the stock market.

Bonds tend to have an inverse correlation to the market, while a booming or depressed market tends to affect consumer confidence and the sale or lack thereof of various forms of real estate/mortgages etc.

So while it may be true that insurance companies do not directly invest in the stock market, one could argue that they are most certainly affected by it.

And that's not even taking into consideration the consumer side of things, where the profitability of the stock market can have a direct effect on the sales of certain insurance products like IULs and annuities, which also has an impact on the bottom line of many insurance companies.

 

[Tahoe Ray]

And that's not even taking into consideration the consumer side of things, where the profitability of the stock market can have a direct effect on the sales of certain insurance products like IULs and annuities, which also has an impact on the bottom line of many insurance companies.

The profitability of the stock market has only a marginal effect on IUL or annuity (fixed or indexed) sales. If anything, a bad stock market (a steady down grind) with higher interest rates is a great market for indexed and MYGA products.

Those products are priced based on interest rates and volatility (which influence options pricing which is how those products' caps/pars/spreads are determined - the carrier is losing nothing). Clients get nervous and want out of equities. It doesn't last long (because the fed will cut rates before it gets too bad) but it's great for business while it does.

 

[Rearden]

Pushed by the major MLMs, I think there was a final expense bubble in market from 2018 to 2022.

Many entered the market during that time. Few were prepared to handle its nature.

My hope is that new entrants better understand the reality of final expense and build a product that's suitable.

Carriers, DM me if you'd like advice.

 

[jdeasy]

Pushed by the major MLMs, I think there was a final expense bubble in market from 2018 to 2022.

Many entered the market during that time. Few were prepared to handle its nature.

My hope is that new entrants better understand the reality of final expense and build a product that's suitable.

Carriers, DM me if you'd like advice.

Companies will never ask the people that can give them actual advice.

 

[FETalk]

The profitability of the stock market has only a marginal effect on IUL or annuity (fixed or indexed) sales. If anything, a bad stock market (a steady down grind) with higher interest rates is a great market for indexed and MYGA products.

Those products are priced based on interest rates and volatility (which influence options pricing which is how those products' caps/pars/spreads are determined - the carrier is losing nothing). Clients get nervous and want out of equities. It doesn't last long (because the fed will cut rates before it gets too bad) but it's great for business while it does.

That is a valid point regarding my second statement concerning annuities and IUL sales.

 

[tikibarrister]

Bonds tend to have an inverse correlation to the market, while a booming or depressed market tends to affect consumer confidence and the sale or lack thereof of various forms of real estate/mortgages etc.

Correlation, but not causation. The stock market reacts to the bond market. The bond market does not react to the stock market. The bond market is influenced by interest rates, and then the rating of the bond itself. Interest rates are influenced by money policy and money supply.

So while it may be true that insurance companies do not directly invest in the stock market

That is not true.

Here's a prime example: Warren Buffett made a career of buying insurance companies so he could invest the float - for example, GEICO. Buffett often mentions the float in his annual meetings.

Here's a longer explanation:

The Insurance Float: the Secret Behind Warren Buffett’s Wealth

The Berkshire Hathaway insurance float model is genius. Learn what insurance float is and it how Warren Buffett uses it to his advantage.

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