The BottomsLine – Fall 2021

We believe: The future of life insurance will be different than in the past. Over the past 30+ years, we have been in a declining interest rate environment. This means that new money pouring into the insurance companies to be invested has generally earned a lower rate than prior new money that was invested earlier when rates for conservative investments were higher. This has created an environment where life insurance overall portfolio rates, common with whole life policies, have been consistently higher than new money rates. If we remain in a prolonged low-rate environment, portfolio rates may eventually meet new money rates at around 3%. Or we may move into an inflationary environment with persistently rising interest rates where portfolio rates lag new money rates. It is important to stress test policy assumptions when projecting values and considering alternatives. If income and estate taxation increase, the value and efficiency of life insurance as a means of cash accumulation during life and capital creation upon death will increase, but product strategy may change.

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