Economic Trends,
Challenges, and
Opportunities for Insurers
NU’s Annual Executive Conferences
New York, NY
November 18, 2010
Download at: www.iii.org/presentations
Steven N. Weisbart, Ph.D., CLU, Senior Vice President & Chief Economist
Insurance Information Institute  110 William Street  New York, NY 10038
Office: 212.346.5540  Cell: 917.494.5945  stevenw@iii.org  www.iii.org
Economic (and Related) Trends
That Will Affect the Industry
in the Next Few Years
2
3 Economic Trends That Will Affect
the Industry in the Next Few Years
 Consumers’ Diminished Buying
Power, especially for Financial
Products
 Consumers’ (and Regulators’)
Preferences for Managing TMI
(Too Much Information)
 The Growth/Spread of Financial
Services Regulation and the Cost
of Compliance
3
Economic Trends That Will Affect the
Industry in the Next Few Years
 Consumers’ Diminished Buying Power,
especially for Financial Products
 Economic Environment:
– Slow Income Growth
– High Unemployment
 Continued Reducing Financial Obligations
 Catching Up on Deferred Purchases of
Durable Goods (especially cars, eventually
houses)
4
Forecast: A Weak Recovery
Real GDP Growth, Yearly, 1970-2014F
Real GDP Growth (%)
9%
The “consensus” forecast is for
several years of real yearly GDP
growth under 3%--weaker than
after most recent recessions
6%
3%
0%
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010F
2011F
2012F
2013F
2014F
-3%
Estimates/Forecasts from Blue Chip Economic Indicators, 10/2010 issue.
Sources: (GDP) U.S. Department of Commerce at http://www.bea.gov/national/xls/gdpchg.xls.
5
Unemployment and Underemployment
Rate “Normality”: Years to Go
January 2000 through
October 2010,
Seasonally Adjusted (%)
18
U-6 hit 17.5%
in Oct 2009
but is now
17.0%
Traditional Unemployment Rate U-3
Unemployment + Underemployment Rate U-6
16
Recession
ended in
November
2001
14
12
Recession
began in
December
2007
Unemployment
kept rising
slightly for 19
months more
Gap between
U-3 and U-6 is
normally 4
percentage
points but is
now 7.4 points
10
8
6
Recession
ended in
June 2009
4
October 2010
unemployment
rate (U-3) was
9.6%. Peak rate
in the last 30
years: 10.8% in
Nov - Dec 1982
2
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Source: U.S. Bureau of Labor Statistics; Insurance Information Institute.
Jan
08
Jan
09
Jan
10
6
ov
20
ec 08
2
Ja 008
n
2
F e 00
b 9
2
M 00
ar 9
2
A p 009
r2
M 00
ay 9
2
Ju 009
n
20
Ju 09
l2
A u 00
g 9
2
S e 00
p 9
2
O 009
ct
2
N 00
ov 9
2
D 00
ec 9
2
Ja 009
n
2
F e 010
b
2
M 01
ar 0
2
A p 010
r2
M 01
ay 0
2
Ju 010
n
20
Ju 10
l2
A u 01
g 0
2
S e 01
p 0
2
O 010
ct
20
10
D
N
6547
6716
6763
3969
4041
3982
4321
4066
3557
4120
3910
3717
3526
3486
3362
3412
3228 2436
3121 2208
3060 2151
3635
3350 2336
3458
3371
3346
3275
3204
3233
3026
2966
3147
2806
2929
3008
2748
2646
2682 2991 2253
3019 2161
3404
*Through October 2010; Seasonally adjusted
Sources: Bureau of Labor Statistics; Insurance Information Institute.
2752
2769
2839
2760
2891
2657
2519
6206
6123
6249
6572
6751
6133
6313
6130
Mean Duration
Nov 2008 = 18.9 Weeks
Oct 2010 = 33.9 Weeks
2235
2696
2632
2840
5-14 weeks
over 26 weeks
5887
5594
5438
4988
4965
4381
Number of People
(Thousands)
3163
3240
2942
2828
2916
3452
3948
3680
Less than 5 weeks
15-26 weeks
3054
2531
2534 3182
2347 2917
3519 1987 2647
3658
4000
3398 1927 2591
8000
3267
12000
3141 17572207
16000
3255
The Number of Long-term
Unemployed Is Still High*
Highest number on
record (since 1948)
0
7
Unemployment and Underemployment
Rate “Normality”: Years to Go
Recession
“officially”
ends
8
Households Are Sharply Reducing
Their Financial Obligations
Debt Service
Ratio
Debt Service Ratio
Financial Obligations Ratio
14.0%
13.5%
13.0%
12.5%
Financial
Obligations
Ratio
19.0%
Debt Service Ratio: mortgage
and consumer debt as % of
personal disposable income.
18.5%
Lowest point
since 1983:Q3
18.0%
17.5%
12.0%
17.0%
11.5%
11.0%
Financial Obligations Ratio: mortgage and
consumer debt, auto lease, residence rent,
HO insurance, and property tax payments
as % of personal disposable income.
16.0%
1987:Q1
1987:Q3
1988:Q1
1988:Q3
1989:Q1
1989:Q3
1990:Q1
1990:Q3
1991:Q1
1991:Q3
1992:Q1
1992:Q3
1993:Q1
1993:Q3
1994:Q1
1994:Q3
1995:Q1
1995:Q3
1996:Q1
1996:Q3
1997:Q1
1997:Q3
1998:Q1
1998:Q3
1999:Q1
1999:Q3
2000:Q1
2000:Q3
2001:Q1
2001:Q3
2002:Q1
2002:Q3
2003:Q1
2003:Q3
2004:Q1
2004:Q3
2005:Q1
2005:Q3
2006:Q1
2006:Q3
2007:Q1
2007:Q3
2008:Q1
2008:Q3
2009:Q1
2009:Q3
2010:Q1
10.5%
16.5%
The Financial Obligations Ratio dropped almost 2 percentage points from 2007:Q3 to
2010:Q2, but it might be tough to shrink further if interest rates and property taxes rise.
Source: Federal Reserve Board, at http://www.federalreserve.gov/releases/housedebt (last frb update: Sept 27, 2010)
Registered Passenger Cars
and Other 2-axle, 4-tire Vehicles
238.31
234.52
231.91
02
228.28
01
222.86
220.93
97
221.82
96
203.17
199.97
194.13
198.86
91
190.78
181.33
90
183.60
181.97
200
187.32
Recession years in gold
207.79
225
212.70
250
237.40
Millions
07
08
175
92
93
94
95
98
99
00
03
04
05
06
It is likely that the number of vehicles dropped during and following the
“Great Recession.” Recovery depends on employment and lending trends.
Sources: http://www.bts.gov/publications/national_transportation_statistics/html/table_01_11.html
Insurance Information Institute
10
13
10.3
12
11
12.6
14
11.4
13.1
15
15.1
14.0
16
14.7
05
In a “normal” 2-year span, new
cars would replace about 25
million old cars, but in 2009-10
only about 17 million old cars will
be replaced
16.1
16.9
04
16.5
16.9
01
17
16.6
00
17.1
17.5
18
17.4
Millions of
Units Sold
19
17.8
The Car-Buying Slump Will Create
Pressure to Replace Aging Vehicles
10
9
99
02
03
06
07
08
09 10F 11F 12F 13F 14F
If the forecasts hold, by year-end 2011, there will be roughly 12 million
more older vehicles on the road than if there were no slump. Buying new
vehicles will compete with paying for insurance, funding retirement.
Sources: U.S. Department of Commerce; Blue Chip Economic Indicators (10/10) forecasts; Insurance Information Institute.
11
Economic Trends That Will Affect
the Industry in the Next Few Years
 Consumers’ Diminished Buying Power,
especially for Financial Products
 Taxes and Health-related Costs Will Take
Higher a Percentage of Income
 Impact of Lost Home Equity as an “ATM”
 Eventual Rises in Inflation and Interest Rates
12
Real Consumer Spending* on Health
Trillions of
Dollars
$2.0
$1.9
These data are adjusted
for general inflation but
not “medical inflation”
In 1995, Health Spending
was 19.6% of Personal
Consumption Expenditures.
By 2009 this grew to 20.7%
$1.8
$1.7
$1.75
$1.69
$1.58
$1.50
$1.5
$1.42
$1.4
$1.2
$1.83
$1.90
$1.64
$1.6
$1.3
$1.78
$1.87
$1.32
$1.19 $1.22
$1.36
$1.26
$1.1
$1.0
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
Health spending has grown as a percent of Personal Consumption
Expenditures, crowding out spending on other items,
and this trend is likely to continue, at least in the next few years.
*Chained 2005 dollars; includes net health insurance outlays
Sources: U.S. Department of Commerce, Bureau of Economic Analysis; Insurance Information Institute.
13
Change in Nominal Disposable Household
Income (Household Income Net of Taxes)
Percent Change
from Prior Year
10%
9%
7.7%
8%
7.1%
6.9%
7%
6%
5.7%
6.1%
5.4%
4.8%
5%
4.5%
4.8%
5.1%
4.6%
5.2%
4.3%
4%
3%
2%
0.7%
1%
0%
96
97
98
99
2000
01
02
03
04
2005
06
07
08
09
With high unemployment likely for years to come,
disposable household income is unlikely to grow much. Federal income
tax cuts, though helpful, may be offset by state tax increases.
Sources: U.S. Department of Commerce, Bureau of Economic Analysis; Insurance Information Institute.
15
Homeowners Aren’t Using Their
Home Equity as an ATM Any More
 Consumers’ Diminished Buying Power,
especially for Financial Products
 Taxes and Health-related Costs Will Take
Higher a Percentage of Income
 Impact of Lost Home Equity as an “ATM”
 Eventual Rises in Inflation and Interest Rates
Roughly 28% of homes
with mortgages now
have negative equity or
under 5% positive equity
16
Economic Trends That Will Affect the
Industry in the Next Few Years
 Regulators’ Recent Approaches to
combat “TMI” (too much information)
 New SEC rules: 401(k) expense charges
 New mortgage rules to come from the
Consumer Financial Protection Bureau?
 Fair Value in Insurance
– Medical loss ratios in small group and individual
health insurance contracts
17
Economic Trends That Will Affect
the Industry in the Next Few Years
 Consumers’ are struggling to deal with
“TMI” (too much information). Insurers can
help with
 Information Presentation/Design: Visibility,
Simplicity
 Better (simpler, more logical) bases for
selecting coverage types/amounts
– For example, how do you choose your auto
liability limits?


What your umbrella liability policy requires?
Household Income, Net Worth, or Recent Liability
Judgments
18
Some Suggestions Improving
Policyholder Information Processing
 A Tip from Behavioral Economics
 Some health plans waive or lower co-pays if patients
take medications as prescribed
–
This results in higher claims for drugs but lower overall costs
as patients recover more quickly and stay well longer

Should homeowners insurers waive “hurricane deductibles”
if a home is built/retrofitted to IBHS standards?

Should disability insurers retroactively waive some of the
waiting period if claimants take their medicine as
prescribed?
19
Some Suggestions Improving
Policyholder Information Processing
 Product Bundles: A tip from Car Companies
 A standard P-C Catastrophe “rider” (a bundle that
includes flood, earthquake, terrorism, etc.)
 A standard Life/Disability/Annuity combination policy
that provides “income insurance”
 Needed: A “Rule of Thumb”
 What percent of a Household’s income should be
devoted to all insurance/financial protection
products?
20
Financial Services Reform
Systemic Risk Oversight,
Federal Insurance Office (FIO):
Compliance Costs to Soar?
21
Systemic Risk: Oversight
Financial Stability Oversight Council
 Mission: to oversee systemic risk of large financial
holding companies [a.k.a. TOO BIG TO FAIL]
 FSOC could determine that insurers present
systemic risk to the financial system, leading to
supervision by the Federal Reserve.
 Supervision would subject such insurers to
tougher prudential standards involving capital
levels and other requirements
Source: Insurance Information Institute (I.I.I.) updates/research; The Financial Services Roundtable;
Adapted from summary by Dewey & LeBoeuf LLP
22
Systemic Risk: Resolution Authority
 FDIC Resolution Authority: Orderly Liquidation
 The FDIC would have an “Orderly Liquidation Authority” mechanism to
resolve distress at financial institutions.
 Insurance holding companies and any non-insurance subsidiaries
of insurers may be subject to this authority.
 Insurers are generally exempt from this liquidation authority, but the
FDIC would have “backup authority” to place an insurer into orderly
liquidation under state law if the state regulator has not done so
within 60 days of a systemic risk determination.
 Liquidation Fund Assessments
 The liquidation fund would be funded by assessments on large financial
companies, potentially including insurers.
Source: Insurance Information Institute (I.I.I.) updates/research; The Financial Services Roundtable; Adapted from summary
by Dewey & LeBoeuf LLP
23
Federal Insurance Office (FIO):
What Will It Do?
 An office within US Treasury headed by a Director appointed by
Treasury Secretary; charged to:
 Study the insurance industry (all lines except health insurance, longterm care insurance and federal crop insurance) to gain expertise.
 Identify regulatory gaps that could contribute to a systemic crisis in the
insurance industry or the U.S. financial system.
 Gather information from the insurance industry to analyze it and
issue reports. May require insurers to submit data; FIO director
can issue subpoenas to obtain such info (but small insurers are
exempt).
 Monitor the extent to which under-served communities have
access to affordable insurance products.
 Oversee the federal Terrorism Risk Insurance Program.
Source: Insurance Information Institute (I.I.I.) updates/research; The Financial Services Roundtable; Adapted from summary
by Dewey & LeBoeuf LLP
24
Federal Insurance Office (FIO):
What Will It Do? (Cont.)
 FIO will also:
 Recommend to the FSOC on whether an insurer (or reinsurer) poses a
systemic risk and should become supervised by the Federal Reserve.
 Report yearly on the insurance industry to Congress and the President.
 Other reports within 18 months:
 On the modernization of insurance regulation in the U.S.
 On the U.S. and global reinsurance market
 Deal with international insurance matters.
 Pre-empt state law when the FIO determines that state law
 is inconsistent with a negotiated international agreement and
 treats a non-U.S. insurer less favorably than a U.S. insurer.
Source: Insurance Information Institute (I.I.I.) updates/research; The Financial Services Roundtable; Adapted from summary
by Dewey & LeBoeuf LLP
25
What Else in the Financial Services
Reform Law Might Affect Insurance?
Bureau of Consumer Financial Protection
 A new entity within the Federal Reserve with authority
to regulate financial products offered to consumers.
 The law specifically exempts insurance products
from this bureau’s authority.
 But after the Bureau is functioning and has
promulgated consumer protection rules for other
financial products,…
Source: Insurance Information Institute (I.I.I.) updates/research; The Financial Services Roundtable; Adapted from summary
by Dewey & LeBoeuf LLP
26
New Rulemakings Under The Dodd Frank Wall
Street Reform and Consumer Protection Act
A total of at least 243 new rulemakings are expected under
the Dodd-Frank financial reform by Federal Agency*
95
100
90
80
70
61
60
56
54
50
40
30
31
24
17
20
10
9
4
2
0
Bureau of
Consumer
Financial
Protection
CFTC
Financial
Stability
Oversight
Council
FDIC
Federal
Reserve
FTC
OCC
Office of
Financial
Research
SEC
* Total eliminates double counting for joint rule-makings and this estimate only includes explicit rule-makings in the
bill, and thus likely represents a significant underestimate.
Source: Wall Street Journal, July 14, 2010; Davis Polk & Wardwell.
Treasury
27
Solvency II
Move Toward More Stringent
Regulatory Requirements for
Insurers Originating in Europe
28
Solvency II: The EU’s Effort to Modernize
Insurance Solvency Regulation
Solvency II is a comprehensive framework for defining
capital levels and relating them to procedures to identify,
measure and manage risk levels
 Solvency I was mainly an update of existing EU solvency regimes,
which had been in existence since the 1970s.
 Since deficiencies had been identified over the years, individual
EU members adopted various fixes resulting in a patchwork of
regulatory requirements inconsistent with the goal of harmonized
insurance regulation across the EU. Solvency II addresses this
goal of harmonization.
Scheduled to Take Effect in the EU on Dec. 31, 2012
Source: European Commission; Wikipedia: http:en.wikipedia.org/wiki/Solvency_II; Insurance Information Institute
29
Solvency II: The EU’s Effort to Modernize
Insurance Solvency Regulation
Consists of 3 Main “Pillars”
 Pillar 1: Quantitative Requirements (e.g., amount of
required capital)
– Establishes qualitative and quantitative requirements for
calculation of technical provisions and Solvency Requirement
Ratio (SCR) using either a standard regulator-provided formula
or an internal model developed by the (re)insurer itself
 Pillar 2: Governance Requirements
 Pillar 3: Disclosure and Transparency Requirements
Source: European Commission; Wikipedia: http:en.wikipedia.org/wiki/Solvency_II; Insurance Information Institute
30
Premiums Written per $1 of Surplus*,
2000-2009
Lowest (Strongest)
Ratios in History
L-H P-C
$2.5 $2.34
$2.08
$2.20
$1.89
$2.0
$1.98
$1.83
$1.55
$1.5
$1.33
$1.14
$1.0
$1.20
$0.96
$1.10
$1.03
$1.63
$1.63
$1.46
$0.93
$0.86
$0.96
$0.82
$0.5
$0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
The lower the ratio, the more capital and surplus the industry has
for the risk assumed (as proxied by Net Written Premiums).
*for L-H companies, surplus includes AVR and IMR
Sources: ISO, A.M .Best, I.I.I.
31
A Challenge
Convincing the General Public
That Insurers
Are Stronger and Safer Than Banks
32
P/C Insurer Impairments, 1969–2010*
8 of the 18
are Florida
carriers
0
16
18
18
14
15
35
31
12
16
18
19
29
4
5
9
13
12
9
11
9
7
8
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
10
15
12
20
16
14
13
19
30
31
34
34
40
36
41
50
49
50
47
49
50
48
55
60
60
58
70
The Number of Impairments Varies Significantly Over the P/C Insurance
Cycle, With Peaks Occurring Well into Hard Markets
*Through June 21, 2010
Source: A.M. Best Special Report “1969-2009 Impairment Review,” June 21, 2010; Insurance Information Institute.
Number of Impaired L/H Insurers,
1976–2009
80
81
Average number
of impairments,
1976-2009: 18.6
90
Compare this stellar performance
in 2008-09 with that of banks.
70
46
55
60
12
The Number of Impairments Spiked in 1989-92, with Smaller Spikes in 1983
and 1999. But in the Financial Crisis, When Hundreds of Banks Failed,
Virtually No Life Insurers Failed.
Source: A.M. Best Special Report “1969-2009 Impairment Review”; Insurance Information Institute.
09
08
07
3
8
9
10
04
5
5
03
01
02
00
99
98
96
97
95
94
92
93
91
90
88
89
87
86
84
85
83
82
81
79
80
78
05
06
10
8
10
12
19
18
12
11
16
16
16
6
77
0
76
10
11
20
10
12
13
12
17
30
24
23
27
32
40
26
38
50
Number of Failed FDIC-Insured Banks,
and Impaired Insurers, 2007–2010*
FDIC-Insured Bank Failures
Impaired L-H Insurers
Impaired P-C Insurers
160
146
140
140
120
100
80
60
40
20
25
3
8
5
9
16
12
18
4
0
2007
2008
2009
2010*
In the Financial Crisis, When Hundreds of Banks Failed,
Virtually No Life or P-C Insurers Failed.
*Bank failures through Nov 12, 2010; P-C impaired insurers through June 21, 2010; L-H impairments in 2010 NA.
Sources: A.M. Best Special Reports; FDIC; Insurance Information Institute.
Opportunities for Growth
Two Populations with Very Different
Financial Vulnerabilities and Needs:
Ages 65-74 and Ages 75+
36
Key Demographics
for People Age 65+ in 2009
65-74
% Educational
Attainment: Grades
1-8
9-12
College
Male %
Female %
Age of household
reference person
Number of people in
consumer unit
75+
8%
42%
50%
12%
48%
40%
46%
54%
68.9
39%
61%
81.6
1.9
1.6
Difference
The 65-74
age group
is more
educated
This will change as
the “baby boom”
generation hits this
age range
Source: http://www.bls.gov/cex/csxstnd.htm#2009
37
19
9
19 8.1
9
19 8.2
9
19 8.3
9
19 8.4
9
19 9.1
9
19 9.2
9
19 9.3
9
20 9.4
0
20 0.1
0
20 0.2
0
20 0.3
0
20 0.4
0
20 1.1
0
20 1.2
0
20 1.3
0
20 1.4
0
20 2.1
0
20 2.2
0
20 2.3
0
20 2.4
0
20 3.1
0
20 3.2
0
20 3.3
0
20 3.4
0
20 4.1
0
20 4.2
0
20 4.3
0
20 4.4
0
20 5.1
0
20 5.2
0
20 5.3
0
20 5.4
0
20 6.1
0
20 6.2
0
20 6.3
0
20 6.4
0
20 7.1
0
20 7.2
0
20 7.3
0
20 7.4
0
20 8.1
0
20 8.2
0
20 8.3
0
20 8.4
0
20 9.1
0
20 9.2
0
20 9.3
0
20 9.4
1
20 0.1
1
20 0.2
10
.3
28%
26%
24%
The brown bars
indicate recessions.
29.3%
29.5%
30%
Labor Force
participation rate
32%
Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.
30.8%
29.3%
30.1%
29.1%
30.3%
30.1%
30.9%
31.0%
30.7%
31.0%
31.4%
30.9%
31.2%
31.6%
31.3%
31.5%
27.9%
28.5%
28.7%
27.9%
27.2%
27.0%
27.4%
27.9%
27.3%
27.8%
27.6%
26.8%
27.6%
26.3%
26.5%
26.2%
22.1%
22.5%
22.3%
23.0%
22.8%
23.0%
22.9%
23.5%
24.4%
24.4%
24.3%
24.9%
24.4%
24.4%
24.8%
25.2%
25.2%
Labor Force Participation Rate,
Ages 65-69, Quarterly, 1998-2010:Q3
22%
20%
The labor force participation rate for workers 65-69 might grow even faster in the future
as seniors find they can’t fully retire on their meager retirement savings.
19
19 98.1
19 98.2
19 98.3
9
19 8.4
19 99.1
19 99.2
19 99.3
9
20 9.4
20 00.1
20 00.2
20 00.3
0
20 0.4
20 01.1
20 01.2
20 01.3
0
20 1.4
20 02.1
20 02.2
20 02.3
0
20 2.4
20 03.1
20 03.2
20 03.3
0
20 3.4
20 04.1
20 04.2
0
20 4.3
20 04.4
20 05.1
20 05.2
0
20 5.3
20 05.4
20 06.1
20 06.2
0
20 6.3
20 06.4
20 07.1
20 07.2
0
20 7.3
20 07.4
20 08.1
20 08.2
0
20 8.3
20 08.4
20 09.1
20 09.2
0
20 9.3
20 09.4
20 10.1
20 10.2
10
.3
Labor Force
participation rate
20%
18%
16%
14%
12.5%
12.2%
12.4%
12.9%
12.4%
13.6%
13.1%
13.1%
13.3%
13.5%
13.6%
13.8%
14.4%
13.7%
14.2%
14.2%
13.8%
14.2%
14.0%
14.0%
14.4%
14.4%
14.6%
14.9%
14.9%
15.4%
15.6%
15.3%
16.4%
17.0%
15.8%
16.2%
16.7%
16.9%
17.2%
17.0%
16.7%
16.8%
18.0%
17.5%
17.3%
16.9%
18.6%
18.2%
17.7%
17.9%
18.9%
19.2%
18.0%
18.1%
17.4%
Labor Force Participation Rate,
Ages 70-74, Quarterly, 1998-2010:Q3
12%
10%
The labor force participation rate for workers 70-74 grew by about 50% since 1998,
but growth has stalled since the Great Recession began.
Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.
19
19 98.1
9
19 8.2
19 98.3
9
19 8.4
19 99.1
9
19 9.2
19 99.3
9
20 9.4
20 00.1
20 00.2
0
20 0.3
20 00.4
0
20 1.1
20 01.2
0
20 1.3
20 01.4
0
20 2.1
20 02.2
0
20 2.3
20 02.4
0
20 3.1
20 03.2
0
20 3.3
20 03.4
0
20 4.1
20 04.2
20 04.3
0
20 4.4
20 05.1
0
20 5.2
20 05.3
0
20 5.4
20 06.1
0
20 6.2
20 06.3
0
20 6.4
20 07.1
0
20 7.2
20 07.3
0
20 7.4
20 08.1
0
20 8.2
20 08.3
20 08.4
0
20 9.1
20 09.2
0
20 9.3
20 09.4
1
20 0.1
20 10.2
10
.3
5%
5.4%
5.2%
5.4%
5.3%
5.2%
5.3%
5.2%
5.2%
5.1%
5.4%
5.1%
5.1%
5.2%
5.0%
5.5%
5.0%
4.8%
5.1%
4.5%
4.6%
4.6%
6%
Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.
6.0%
7%
6.5%
6.5%
6.4%
6.6%
7.1%
7.0%
6.9%
6.9%
7.2%
7.4%
7.6%
7.6%
7.0%
7.2%
7.3%
7.3%
6.9%
7.7%
6.7%
6.6%
6.5%
Labor Force
participation rate
8%
6.3%
6.1%
5.9%
5.8%
5.8%
5.9%
6.0%
6.1%
Labor Force Participation Rate,
Ages 75 & over, Quarterly, 1998-2010:Q3
These people were
born before 1935
This percent is
forecast to grow to
10.3% by 2018
4%
The labor force participation rate for workers 70-74 grew by about 50% since 2002,
but growth has stalled since the Great Recession began.
Overview of Annual Income
for People Age 65+ in 2009
65-74
75+
Change from
65-74 to 75+
After-tax income
$46,147
$31,272
$-14,875
Earnings
$20,573
$6,106
$-14,467
Social Security
$23,578
$22,038
$-1,540
$3,135
$3,571
$436
$42,957
$31,676
$-11,281
$3,190
$-404
All other income
Avg annual expenditures
After-tax Income minus
expenditures
Shift from saving
to dis-saving
Source: http://www.bls.gov/cex/csxstnd.htm#2009 ; I.I.I.
Almost all of the
income drop was due
to stopping earning
41
Overview of Annual Expenditures
for People Age 65+ in 2009
65-74
Avg annual expenditures
75+
Change from
65-74 to 75+
$42,957
$31,676
$-11,281
Healthcare expenses
$4,906
$4,779
$-127
Vehicle costs
$6,657
$3,334
$12,486
$11,208
$376
$297
$-79
$3,567
$2,851
$-716
2,087
$2,378
$291
All other expenditures
$4,401
$1,520
$-2,881
Vehicle insurance
$1,214
$712
$-502
$397
$234
$-163
$1,976
$603
$-1,373
Housing (ex mortgage int)
Public Transportation
Food at home
Cash contributions
Life/other personal
insurance
Mortgage interest
Source: http://www.bls.gov/cex/csxstnd.htm#2009 ; I.I.I.
Healthcare costs
don’t drop with
drop in income
Mortgages finally paid off?
Probably not true for the
next generation
42
Insurance Information Institute Online:
www.iii.org
Thank you for your time
and your attention!
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