The government shutdown may be at an end, but its negative effects are still lingering. For some segments of the insurance industry, the resulting delay in September’s report on the consumer price index may make it more difficult for insurance professionals to sell or renew life and disability insurance policies.
The CPI report, which reflects rates of household inflation, plays an important role in calculating premiums and payouts for certain insurance policies. Originally scheduled for release Wednesday, the report is now on hold while next month’s report may not be released at all, as the federal government struggles to catch up with its workload.
Without this vital data, it may be tough for carriers to accurately negotiate premiums for such policies, said Steven Weisbart, chief economist with the Insurance Information Institute.
“Premium rates might be affected, since actuaries have to anticipate inflation’s effect on claims that arise during the term of the policy, and to a degree their assumptions are based on recent trends,” Weisbart said. “The delayed CPI report means they will have less recent data on which to propose rates.”
This delay has particular importance for carriers and producers looking to renew clients’ life and disability income insurance policies, which typically include inflation riders that draw from the CPI.
“If a policy is up for renewal when a CPI report is delayed, benefit increases pegged to it would likely be delayed,” Jack Dolan, spokesperson for the American Council of Life Insurers, told the Wall Street Journal.
Despite the delay, Weisbart doesn’t think the postponed report will amount to anything more than a few hiccups.
“It’s likely [carriers] will assume inflation will continue rising modestly, as it generally has been doing for several years,” he said.
Dolan also says he believes insurers will be able to do some readjustments as soon as the CPI report is available, averting most difficulties.
“Companies will retroactively adjust the benefit level once the CPI is published again,” Dolan said.
Elsewhere in the industry, the postponed report isn’t causing too many wrinkled brows.
“The delayed CPI report isn’t likely to have much direct effect,” Weisbart said. “There are very few insurance contracts that are directly affected by the published CPI.”
