Insurance companies are taking advantage of the ‘bloom insurance’ boom to raise rates, write analysts
Bloomberg View—Insurers are taking a hit from the surge in insurance premium hikes after the Federal Reserve lowered interest rates to support the economy and ease the burden of rising debt on the U.S. government.
Insurers raised rates on Monday to a six-year low, after a surge in the number of people who purchased coverage in the first half of the year.
That has hurt some companies in the insurance industry, which typically offers lower-cost plans that can last for a longer time.
The increase in insurance premiums was the biggest since March 2009, when the Fed raised rates to a record low of 0.25% a year.
The spike in premiums has hurt insurers like UnitedHealth Group, which raised rates by a quarter point to $16.60 a month.
The premium hikes were in addition to the 1.5% hike announced last week by the federal government to help finance the $1.1 trillion stimulus bill, the stimulus package signed by President Barack Obama in February.
The rate increases for insurance companies were driven by people who paid more than $200 a month for policies, up from $175, according to a survey from Blue Cross Blue Shield of America.
They also helped the overall industry to post record revenue and earnings, the survey found.
Insurance companies have been increasing rates since the financial crisis in 2008.
The industry is expected to post revenue of $2.9 trillion in 2018, up slightly from $2,924.5 billion in 2017.