Life Insurance Rates

Life insurance rates are constantly rising, and confidence remained at the maximum level in the fourth quarter of 2007, according to the latest Ernst & Young Insurance index. This strong confidence was measured despite slower premium and investment income growth, the global assurance, tax, transaction and advisory services group says. Even so, despite the tapering off in growth, both categories of income remain nevertheless, strong.

This is the 18th quarterly survey conducted to measure confidence in the insurance industry. Life insurance confidence leads that of the banking industry (96 points), and investment management confidence (98 index points). Comments Tim Rutherford, industry spokesperson at Ernst & Young: "The perception of an industry under siege has passed. Life insurers fared well in 2007, and we expect the reporting season for the year to be solid.

Life insurance rates are good, but health insurance companies are not expecting the strong investment returns to hold into 2008. The outlook is that investment income will contract in the first quarter of the year, and although they have proved to be pessimistic about investment income earnings, it is most likely that investment income growth will at least taper sharply downwards in the quarters ahead," says Rutherford. He could have a point, which is why the industry is trying to change in order to fit people’s lives more.

Efficiencies have consistently improved over the last few years, despite higher employee numbers. Rutherford points out that it has been necessary to grow employee numbers to cope with higher capacity requirements, as well as higher rates. However, he adds that unlike the banking and investment management sectors, employee growth trends at life insurers have been more erratic. This is most probably due to the aforementioned restructuring of business processes and operations that the industry has experienced. In line with the other financial services sectors, life insurance industry confidence remains high.

In fact, confidence is the highest of all the financial services sectors. "Life insurers are not as prone to interest rates increasing and volatile equity markets as immediately as their banking and investment management peers, respectively are. However, slower consumer expenditure is likely to ultimately impact the retail side of their business, particularly in new market segments, where life insurers are playing more and more. For the moment, however, they are benefiting from business restructuring and process re-design. Despite slower profits and premium growth, both remain at high levels," Rutherford says.