Although the outlook for the life insurance industry has been changed to negative, it is also important to look at individual company situations, say analysts for Fitch Ratings, Chicago, and Moody's Investors Service, New York, the agencies that recently issued negative industry outlooks.
In spite of the negative outlook, there are many companies that are fairly well positioned in their ratings level, says Laura Bazer, a Moody's vice president and author of the outlook report. Downgrades on individual companies would depend on a number of factors including risk due to sub-prime related mortgages, Bazer explains.
In the current market, all industries are vulnerable and market concerns could "absolutely have an effect on consumer buying of insurance products," she says.
"To a large extent, a lot of products are discretionary," Bazer continues. Consumers may put less in their 401(k) accounts and may have less money to buy life insurance policies or may buy policies with lower face amounts, she cautions. Disability income writers may witness more claims because in difficult economic times, claims usually increase, Bazer notes.
There are also higher hardship provision withdrawals as corroborated by a few companies, she notes.
Additionally, if there are bank consolidations, Bazer says, and, for example, there are 5 carriers on the acquirer's shelf, then the acquirer could limit or eliminate carriers on the acquired bank's shelf.
