The United States recession has forced service providers to look across the ocean for new clientele. We see markets emerging abroad selling premiums once only offered to the Western World. With less money invested in U.S. business, a recession still underfoot, massive layoffs across the nation and continued outsourcing; citizens of the U.S. just don’t have the money to invest in these premiums.
Life insurance is an optional premium, and with any optional purchase it needs to attract to those who can afford the non essential. According to a study by LIMRA in 2010,“[T]he percentage of U.S. households with life insurance coverage is at its lowest in 50 years. Only 44% of households have an individualized life insurance policy.” In the business of life insurance, markets with excess income are attractive. Increased population creates more clients, equates to more business, and increases profit. Ipso facto new market growth.
A quick glance at Bloomberg and one can track the new business model. U.S. stocks have fallen significantly. “[T]he 9.4 percent [drop] since July 22 dragged the S&P 500’s valuation to 13.4 times reported earnings, the cheapest level since April 2009”.  As for the Asian market, “the yuan strengthened beyond 6.4 per dollar for the first time in 17 years”.
When it comes to life insurance premiums, the wealth managers production relies on his/her ability to find new clients and place new business. The trend for business to move overseas is underway within the life insurance policy market. India is one of the newer markets selling life insurance. As of June 30, 2011 there are presently 24 life insurers registered to sell policies in India. Within the U.S. there has been a decline of agents. ”[I]n 2010, there were 184,873 “affiliated agents”, down from more than 246,000 two decades ago”.
In India, insurers provide somewhat of a hybrid to their policy holders. Current trends provide sales of a combination coverage called unit linked insurance policies, ulips. An almost mirror image to the variable universal life insurance policy, existing in the U.S. Both allow for flexible terms, however differ in that the ulips allow for the combination of risk cover and investment.
There is also the magic word consumers love to hear, a guarantee. Lest the insured have an issue with the insurers policies, the Indian Insurance Regulatory and Development Authority (IRDA), provides an ombudsman to mediate grievances. (Different from the standards in the United States). Strict guidelines are followed to appoint each ombudsman, and in office an ombudsman will be forced to leave if found partaking in any misconduct pursuant to the rules set forth by IRDA.
So, what say for the U.S. life insurance market? Will the U.S. begin offering services similar to those in the new foreign markets? Will the recession affect the U.S. life insurance market so much that it becomes obsolete? One thing is for certain, insurers fortify their continued dominance in the U.S. market with confidence, “…uncertain economic conditions continue to play to [our] greatest strengths.”
Contribution by: Morrissa Handy, J.D. Candidate, Thomas Jefferson School of Law
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Sandra Block, USATODAY, Households With Life Insurance Hits Lowest Level in 50 Years
(updated Dec. 03, 2010, 2:21 p.m.).
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