The long term profit outlook for the life insurance market will remain poor for the immediate future as it remains linked to the low performance of equity markets and saddled with negative perceptions by customers.
The comments are part of the findings byStandard & Poor’s(S&P) released in its Insurance Industry Report Card released today which says that life insurance groups are “inextricably tied to investment market sentiment by virtue of the nature of products they provide”.
S&P says while the market showed signs of recovery this would not immediately flow through to the life insurance market as consumer sentiment was still weak, resulting in inflows linked to investment market-related life products lagging behind.
There was also little salvation in growth of premium incomes, with the risk insurance market showing solid growth but at only 2.78 per cent of total industry premiums to the end of December 2002, the impact of this growth was minor.
According to S&P, 94 per cent of new business premium income in 2002 came from single premium business with the researcher saying given that number, the link between investment market sentiment and the level of life company premium income written in any one year is clear.
Traditional older-style investment products offered by life companies were also a source of concern as consumers moved towards investment-linked contract provided through master funds.
However S&P says life companies have responded to these downturns by looking at core operations and are now focusing on niches such as distribution or platforms.
