Your Insurer Is Getting Paid Twice. Here’s How to Get in on It.
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| By Al Qureiyeh |
If your home or car insurance bill went up this year, you’re not alone.
But there’s a way to get some of that money back: Own the companies collecting it.
Right now, insurers are getting paid twice.
First, they collect your premium upfront. Then they invest it in bonds until claims come due.
Those bonds pay more than they have in years.
The Fed Kept Rates High. Insurers Collect.
On Wednesday, the Federal Reserve held interest rates steady, and two officials voted for another hike. That tells us rates are likely to stay high for a while.
For savers, that’s good news. For insurers, that’s potentially very good news.
The 10-year Treasury yield has hovered near 5% this month.
Every dollar an insurer holds earns more at those rates, and it shows.
Consider that Travelers (TRV) and Chubb (CB) both reported record investment income this month.
We’ll talk more about those two stocks in a moment. Looking at the industry overall …
Insurers Have Done This Before
In 2022, the last year the Fed kept raising rates, the SPDR S&P Insurance ETF (KIE) returned 3%, including dividends. The S&P 500 lost 18%.
In June 2023, the Fed paused and then raised again. Over the next three months, the insurance fund gained 9.7%, while the market gained 3%.
The SPDR S&P Insurance ETF vs. the S&P 500 in 2022 and in the three months after the June 2023 Fed pause.
Fast-forward to the present day, and …
The Weiss Ratings Favor the Insurers
Weiss rates the SPDR S&P Insurance ETF as “B-,” a Buy, with a Reward grade of “B” and a Risk grade of “C+.”
Three of its biggest names rate even higher: Travelers is an “A+,” and Chubb and Allstate (ALL) are each an “A.”
In other words, all three are “Buys” in the Weiss universe.
And they’re cheap! As a group, these insurers sell for about 10x earnings. The S&P 500 sells for 19x.
Compare that with where many cautious investors have been hiding. The Consumer Staples SPDR (XLP) earns a “C+” grade, a “Hold,” and the Utilities SPDR (XLU) earns a “C,” also a “Hold.”
What Could Go Wrong with a Bet on Insurers
Insurers don’t win in every market.
Business insurance prices fell 5% worldwide last quarter, the ninth drop in a row. And storm losses rose at Travelers and Chubb.
Higher rates also lower the value of bonds insurers already own. Chubb booked $4.5 billion of these paper losses last quarter, though its book value still rose from a year earlier.
And insurers are no shelter in a panic. KIE fell as hard as the market in the April 2025 tariff sell-off.
If rates fall sharply, the case weakens.
How to Play It
With some six weeks until the next FOMC policy meeting, rates should stay in the 3.75% to 4% range until then.
And after Wednesday’s meeting, Chair Kevin Warsh announced fewer rate-setting meetings in 2027.
That suggests fewer chances to make changes.
KIE closed at $ 62.27 Wednesday. Not only will people always need insurance — and in many cases, they’re required to buy it — but it also pays you to wait.
This fund pays about 1.5% a year in quarterly dividends.
KIE goes ex-dividend on Dec. 21. The projected dividend is around 18 cents per share.
Buying now would ensure you are on board to collect it.
Do your own due diligence and make sure this investment is right for you, before you make any decisions to buy.
You can always use the tools provided in Weiss Ratings Plus to investigate KIE or any stock or fund you’re interested in owning.
Click here to see how you can put the power of Weiss Ratings to work for you, on demand!
And if you decide to target Travelers, Allstate or Chubb instead, that can also be a great idea. You can use the “Compare” feature within Weiss Ratings Plus to see how they stack up to KIE or to each other.
Either way, insurers collect your premiums up front and invest them at the highest rates in years.
They beat the market the last time the Fed kept rates high, and they sell for about half the market’s price-to-earnings ratio.
Take care,
AL Qureiyeh
