Today's episode dives into a discussion of how economic conditions and more specifically how interest rates have and will effect whole life insurance dividends. What happens if rates go down further? I know it doesn't seem likely but there are other countries around the world that have negative short term rates currently.
Or better yet, what happens if rates move higher (as the Fed seems to be indicating will happen throughout the rest of the year)?
I'm pretty sure that no one ever anticipated a world where the Fed would hold short-term interest rates at 0% for as long as it has. Obviously, this has had an impact all along the yield curve (see below).
And it certainly has an impact on life insurance companies.
But probably not in exactly the way that you would expect. Life insurance companies definitely buy boatloads of bonds as they are required to “match” underlying assets with the liability they assume in issuing new policies.
However, they're not under as much pressure as you might think.
Why? Well, listen to the episode to hear more on the specifics.
Brantley is a practicing life insurance agent and has been for nearly 18 years. After years of trying to sell like his sales managers wanted him to, he discovered that people want to buy life insurance if you actually explain the benefits.
Indexed Universal Life Insurance Pros and Cons
Will Your Indexed Universal Life Insurance Policy Produce an 8% Average Return?
IPB 107: When Interest Rates Go Up, Bonds Go Down. What Does It Mean for my Life Insurance?
IPB 105: Is Indexed Universal Life Insurance Worth it even if the Interest Rate Assumptions are Wrong?