Regulators may make life insurance industry harder to navigate

One of the things that's most often cited by those in the life insurance industry as a potentially major impediment to future growth is heavy – and growing – oversight from regulators at both the state and federal levels. Unfortunately for those participating in the industry, it seems as though this trend is unlikely to go away any time soon.

The life insurance industry is suffering more than some experts believe it should, according to a report from Life Health Pro. The latest data from the Financial Stability Oversight Council (FSOC) shows life insurance revenues down 9.6 percent from the record levels seen in 2012.  Low interest rates continue to be a challenge for the industry. While long-term interest rates increased last year, investment margins continue to fall below historic averages. If low margins persist, investment returns may not be sufficient to meet future liability cash flow demands for some companies.

But moreover, the concerns about regulatory controls tightening are likely well-founded, and could prove extremely troublesome going forward, the report said. The FSOC is watching closely the creation of captive insurance companies.  There are also potential changes to the federal tax code that could likewise take a major toll on the industry. Specifically, the U.S. House Ways and Means Committee is reviewing the taxation of permanent life insurance products used to fund non-qualified deferred compensation plans for business executives. Proposed changes to the tax laws could have a major impact on the sale of these products.

Another major issue beyond the insurance industry
Many experts have also cited the fact that partisan rancor in Washington DC is slowing economic progress. It is likely this issue will only become more of a problem over the final years of President Obama's second term, the report said. Those in the life insurance industry generally agree this issue could be problematic for the broader economy, as well as their sector in particular.

Life insurers must continue to stay on top of developments in the economy and Washington DC. Many Americans turned away from life insurance products during and following the financial crisis. Insurance companies would be wise to refocus on those individuals going forward. Marginal improvements in the national economy could be good news for these individuals and the life insurance industry.