The frenzy of the markets, combined with policyholder s willingness to assume more investment risk, has caused a significant sales shift from fixed to variable products. This shift has placed pressure on the investment returns of the underlying separate accounts, while displacing some pressure on the investment returns of the general account backing the fixed products. This economic environment has caused many people to speculate on the future of fixed-account products. While sales of variable products recently have overshadowed the fixed-account products, consumer interest is likely to shift back to fixed products when the stock market cycles down or when the policyholders are no longer interested in taking on the investment risk. A shift back to fixed products will refocus attention on the performance of the fixed products specifically, the return of the general account assets supporting the fixed products.
Investment performance is a crucial component of product competitiveness.
How the investment performance of an insurance company s assets stacks up to another company s performance can be an important element of the sales process. The investment margin can be a major source of earnings for many life insurance companies. Furthermore, the composition of a company s assets are a major determinant in a rating agency s assessment of a company s financial strength rating. It is understandable why insurance company executives want to evaluate the performance of the individuals responsible for managing the company s assets. But many companies have not adopted effective benchmarks for evaluating that performance.