NU Online News Service
Households are reducing their financial obligations, which mean one thing to the insurance industry: impeded growth.
Speaking at The Annual Executive Conferences in New York, Steven N. Weisbart, a senior vice president and chief economist for the Insurance Information Institute, said consumers' diminished buying power, especially for financial products, will continue to stand in the way of growth for insurers.
Simply put, the country is not recovering after the latest recession as quickly as it has after past recessions. Using graphics to prove his point, Weisbart showed that the gross domestic product grew over three percent after past recessions but growth is expected at a slower rate since the most recent recession.
In addition, he said, the spread between unemployment and comprehensive unemployment (a measure that includes people who are no longer looking for work) is greater than normal. Currently unemployment stands at 9.6 percent while the comprehensive number is at 17.6 percent. The spread between the two is typically 4 percent. About 6.25 million people are considered long-term unemployed, he added.
These factors are shrinking disposable income in households, which affects purchases like insurance beyond that which is mandated.
New car purchases are down about 6 million units since 2007. However, the number of registered vehicles remains about the same, meaning people are keeping their older cars and not buying unless they have to.
On top of the challenges faced as a result of the economy, insurers' growth will likely be stymied by the costs of complying with new regulations from government entities such as the Federal Insurance Office, which is charged with gathering information about the industry.
Weisbart said it will be an "intrusive and expensive proposition to comply" with the FIO.
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