War Of Words Over Term Price War

Another expert notes that reinsurers have been raising rates. "A lot of primary life companies heavily use reinsurance companies, and reinsurers have increased pricing," says Robert Riegel, a managing director at Moodys Investors Service Inc., New York.

A key reason for the price pressure is the statutory reserve requirements under Guideline Triple-X, Riegel points out. Enacted by the National Association of Insurance Commissioners, Triple-X tightened reserving standards for level premium products, including term and UL.

Riegel notes, too, that while there have been significant rate declines for the preferred and super-preferred classes of insureds, rates have gone up for many other consumers. In fact, some insurers are competing on the basis of in what preferred status they are willing to put a given applicant, he adds.

Robert L. Barney, president, Compulife Software Inc., Nicholasville, Ky., says "the idea that a term price war is going on is hooey."

Barney, whose company runs the Web site, term4sale.com, says companies are doing little to change their rates. "There is some tweaking going on, but everyone is waiting for the new 2001 CSO tables to take effect," he says.

Those tables are generally 20% to 40% lower than the 1980 CSO tables currently in effect, he notes. But he doesnt expect them to take effect until next year or early 2006.

Barney says the market is in a holding pattern right now, with some rates up and others down.

"Term insurance sales have dropped like a rock," he says. "Sales are soft. It has been a very competitive market for the past decade, and most companies profits were brought down to a bare minimum."

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.