Life insurance has been like the oatmeal of financial services products in recent years.
Life insurance serves an important financial wellness purpose, and it fills life insurers with premium revenue. But, except for variable universal life and indexed universal life, it has not been a hot growth product.
If, however, the investment markets keep flying up and down, that could suddenly make the stability of life insurance look a lot more appealing.
Here's a look at five questions that could end up shaping our life insurance coverage in 2019.
1. How's the economic backdrop?
Low interest rates have been helping stocks and mutual funds, and hurting the sales of traditional insurance products, according to Ernst & Young's 2019 outlook report.
Now, Increased interest rates and record high employment favor life insurance sales," the Ernst & Young analysts write.
2. How are the economics for life insurers?
Dennis Glass, president of Lincoln Financial, pointed out at recent conference organized by Goldman Sachs that life insurers care at least as much about credit spreads, or the difference between what less secure borrowers pay in interest and what more secure borrowers pay, as they care about the actual rate.
Today, when the interest rate yield curve goes down by 0.01 percentage points, credit spreads increase by 0.01 percentage points. Spread compression has cut Lincoln Financial's growth by 2% to 5% over the past few years, Glass said.
"Volatility is not particularly healthy for any business." Glass said.
But the wider spreads created by the volatility should be good for life insurers, Glass said.
Analysts at Kroll Bond Rating Agency reported in its 2019 outlook that life insurers have strong bases of capital and liquidity, and that they can handle short-term volatility.
3. How are consumer preferences changing?
Ernst & Young makes the case in its 2019 outlook that the Millennials, or people born from 1981 through 1996, are much more likely than boomers to let spending on going out to eat, going on vacations and other fun activities crowd out life insurance than Boomers are.
The firm contends that the new focus on "financial wellness" efforts is necessary to getting Millennials to build life insurance premiums into their budgets.
It may be interesting to find out whether Millennials are really different from the Boomers, or simply younger and facing different kinds of expenses.
4. What's happening with opioids?
More than 70,000 people died of drug overdoses in the United States in 2017, and there are signs mortality may be accelerating.
In December alone, the list of opioid overdose victims who have made the news has included two nurses in a Dallas hospital; Colin Kroll, the co-founder of Vine; and Brian Joyce, a former Massachusetts state senator.
Due in part to the increase in drug overdoses and other drug-related deaths, overall U.S. life expectancy has been falling slightly for three years in a row.
Other sources of sudden spikes in mortality, such as Ebola, could also raise questions in 2019. The Democratic Republic of Congo is trying to control a severe outbreak of Ebola while coping with civil unrest. The outbreak has killed at least 347 people, according to DRC health ministry figures.
