Life Insurance Quotes

Triple X, the insurance regulation that makes larger insurance company reserves a requirement in 37 states, has not created the dramatic premium increases or reduced sales that were predicted when the regulation became effective on Jan. 1, 2000, according to a study released by Conning & Co. on Feb. 12, 2001.

Triple X, or Regulation XXX, is a regulation promoted by the National Association of Insurance Commissioners (NAIC) that dictates how much moneylife insurance companies must have in reserves to pay for term life insurance benefits. The NAIC believed that life insurers' reserves were too low, which could imperil their ability to pay future claims. In addition, the NAIC believed some companies were offering premium rates for term life that were too inexpensive, which would make it difficult for those companies to keep enough money in reserve.

Conning says "the jury is out on Regulation XXX's impact on cost and profitability." In its first year, Triple X did not cause the widely predicted premium rate jumps of up to 50 percent, with prices rising only moderately. Sales are maintaining a 10 to 11 percent annual growth rate.

Conning says intense price competition in the term life industry has meant relatively stable premiums for term life insurance, although several major insurers saw premium hikes for 20- and 30-year term policies. Those insurers are domiciled in states that enacted Triple X and had very low prices before the regulation was adopted. Their price hikes were counteracted by other companies who are domiciled in non-Triple X states, who increased rates very little or even reduced rates. And insurers domiciled in New York, which adopted Triple X, are actually enjoying less-stringent reserve requirements now than under New York's previous reserve regulations. Conning concludes that if more states adopt Triple X, more insurers will be forced to comply with its reserve requirements, causing a more dramatic premium increase.

Insurers are responding to Triple X by emphasizing permanent life products and developing new term products, Conning reports, concluding that the term life marketplace "will remain attractive" but also competitive, with sales continuing to grow by 10 to 11 percent annually. Price competition will be insurers' main strategy, driving prices down and forcing insurers to confront expenses, particularly distribution costs. That could mean declining commissions and rising direct and Internet sales as insurers seek to maximize profit by cutting costs.

Conning surveyed 24 companies that account for 35 percent of term life insurance first-year premiums.