Disintermediation Risk (Life Insurance Companies)

[JSobes]

Why would a policy holder be more likely to withdraw cash from their policy when interest rates are high? Is the idea that there is a higher credit card interest rate, so people need more cash or something?

 

[Galli]

They withdraw to reinvest at the higher rate

 

[S2000magician]

That’s pretty much it.
The return on a whole-life policy from the life insurance company is … paltry.

 

[June06]

reinvest those proceeds in other financial intermediaries or investments offering a higher return (yield).