Is The Final Expense Industry Secretly Being Monopolized?...

[FETalk]

Why are all these insurance companies suddenly dropping out of the final expense market? Is this just a "veiled" attempt by a handful of companies (and hedge funds) to monopolize the industry?

 

[jdeasy]

I don't think it's much of a secret that is the plan. Or idea?

They have been buying up IMO's for a few years now.

 

[Allen Trent]

Why are all these insurance companies suddenly dropping out of the final expense market? Is this just a "veiled" attempt by a handful of companies (and hedge funds) to monopolize the industry?

Most industries that get bought up or monopolized have large profit margins. FE carrier profits are dismal lately. Too much cost of technology, too much writing of bad risks, too much or too little policy retention, etc.

Not hearing of many FE carriers being bought out by private equity like you saw in large IMO or large PC agencies or HVAC companies or Apartment complexes, etc.

 

[FETalk]

Most industries that get bought up or monopolized have large profit margins. FE carrier profits are dismal lately. Too much cost of technology, too much writing of bad risks, too much or too little policy retention, etc.

Not hearing of many FE carriers being bought out by private equity like you sew in large IMO or large PC agencies

I hear what you're saying, but I don't know if I buy that. The final expense industry has been around for over a century, and they have the underwriting process down to a science.

I don't believe it simply comes down to them writing bad business or the cost of technology.

And by the way, even if I granted the second part of your premise, no one is forcing companies to incorporate all this "expense" technology.

The final expense product is very simplistic, and they could easily go back to using the systems of yesteryear.

 

[Allen Trent]

I hear what you're saying, but I don't know if I buy that. The final expense industry has been around for over a century, and they have the underwriting process down to a science.

"I don't believe it simply comes down to them." writing bad business or the cost of technology.

And by the way, even if I granted the second part of your premise, no one is forcing companies to incorporate all this "expense" technology.

The final expense product is very simplistic, and they could easily go back to using the systems of yesteryear.

I get that, but do you think FE industry was properly priced for a pandemic spike in death claims & life expectancy? Low interest rate environment most of last 15 years.

Expenses, mortality, investment returns are almost entire categories that have to each play out perfectly.

It just doesn't seem to be profitable. This seems obvious to me when you look at how many FE or Funeral Plan carriers go out of business or suspend sales compared to non FE life insurance marketplace

 

[FETalk]

You might have a slight point regarding the pandemic, but do you believe that 3-4 years in which the majority of deaths occurred with people in their seventies (I believe late seventies) and eighties would be enough to set back the entire final expense industry?

Wouldn't they simply be able to make the appropriate underwriting adjustments to mitigate the new risk?

As far as the low interest rates; that's nothing new, rates & earnings have always fluctuated since the dawn of the stock market, but over time earnings have always come out "in the black".

 

[DonP]

Fe CO's have ski, slim profit margins . When you pay 200% commissions the first 2 yrs plus expenses plus high death claims it's really hard to make much money. I'm very surprised more CO's didn't raise rates after the pandemic with increased claims plus big inflation

 

[jdeasy]

The sky is not falling.

I transitioned to FE focused over 15 years ago.

I have more companies available to me today than I did then.

I have more lead options than I did then.

I have higher commissions than I did then.

I have far more companies for serious health conditions than I did then.

I'm writing more business now and working less.

So y'all go on and hand wring.

 

[Jccwell]

This industry has survived pandemics and recessions. It's pretty solid.

End of the day, whether or not it's going down is out of our control. Keep plugging away and writing business while you can.

 

[Baseball7]

@Don they had just repriced for new CSO tables then Covid happened. Talk about bad timing.