IPB 028: How the Current Economy Impacts Whole Life Insurance

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).

yield curve 5-24-2016

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.

About the Author Brantley Whitley

Brantley is a practicing life insurance agent and has been for over 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.

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