Lehman Predicts EGTRA Will Cut Estate Planning Insurance Revenue By One-Third

The Lehman analysts estimate that roughly 15% of younger consumers and 20% of older customers who expect to live till 2011 will keep their current estate-protecting insurance arrangements, on the assumption that the current estate tax rate will come back to life.

But older consumers who expect to die by 2011 may cut their estate planning insurance by as much as 50%, and at least three-quarters of the consumers who expect to live past 2011 will probably cut their insurance by an average of about one-third or more, on the assumption that Congress will either renew the elimination of the estate tax or bring back a modest estate tax.

"Our bottom line is that, with respect to that portion of [insurers'] business that is estate-tax oriented, the companies could be affected in a big way," the analysts write. "Our best sense, based on our decision-tree analysis, is that one-third of this business?both new policies and existing policies?will go away over the next year."

But estate planning products account for less than 20% of the revenue at the life insurers Lehman follows, so the shift should cut those insurers' total revenue less than 7%, the analysts conclude.