Across the U.S., the life insurance industry has been through some ups and downs in the past several years. There have been occasional upswings thanks to the strength of the economy as a whole, and also some downturns in the occasional quarter for one reason or another. In the second quarter and entire first half of 2019, however, results were more or less right down the middle.
Life insurance sales as a whole dropped 5% on an annual basis in the second quarter, and first-half policy count slipped 4% overall, but those were offset at least somewhat by annualized premium growth that held steady during both periods, according to the latest U.S. Retail Individual Life Insurance Sales Survey from LIMRA. As one might expect, specific products saw some disparate results in the first half and second quarter, with indexed universal life in particular providing a strong highlight.
Digging into the numbers
Overall, IUL premiums grew for the 11th straight quarter, rising 4% for the period from April to June, and 7% in the entire first half of the year, the report said. This increase alone made up about two-thirds of universal life insurance premium growth in the second quarter, and nearly a quarter of all individual life insurance premium growth.
Ashley Durham, associate research director at LIMRA Insurance Research, noted that this growth helped offset some rather sharp declines in other universal life products (such as those that provide a lifetime guarantee) which arrived because of low interest rates overall.
Meanwhile, variable life products remained strong and ensured numbers as a whole grew for the seventh straight quarter. However, variable universal life was the clear standout, with a 7% annual increase in the second quarter and 9% for the whole of the first half. Protection-focused products were the driver of much of that growth, with premiums growing 23% to offset the 10% quarterly loss for products more geared around accumulating value.
Meanwhile, there was a 1% increase in both the quarter and half examined for term life insurance, which made up about 22% of the total life market.
Gaining traction with consumers
While it is clear that some products currently hold more appeal for consumers than others, that's actually something that could work to the advantage of insurers, brokers and agents as a whole. LIMRA further noted that specializing in offering multiple lines of insurance might be the key to unlocking even more life sales; at present, these agents only derive about 14% of their income from life insurance products.
Today, about 2 in every 5 consumers in the middle market do not have life insurance, and as such could benefit from advice from a multi-line agent in particular since this is likely someone they already work with for other financial needs. Overall, about 75% of these agents' clients have household incomes below $125,000, but their client base is typically more than double that of professionals who specialize in just one type of coverage. Moreover, their client base tends to span generations and they may already have an existing rapport with many of them due to the strong advice they provide on property and casualty coverage.
Finding an understanding
It's worth noting that more than half of consumers these days have access to some life insurance options through their employers, and the problem is often that people think such coverage is enough to meet all their needs, according to Policy Genius. There are certainly some positives that come with group life insurance obtained through work, whether it's provided by a specific employer or a trade union, but as with so many other things in the life insurance industry, misconceptions are common.
Insurers, brokers and agents likely need to do a better job of impressing upon consumers that group insurance is great, especially because it's typically easier to obtain than individual coverage and an employer will typically cover all or some of the cost, but it shouldn't be the be-all, end-all of a life insurance strategy. Often, this coverage merely replaces about a year or two of income, and the general rule of thumb is people should have 10 times their current income in life coverage. Moreover, these policies are typically devoid of customization options, meaning consumers might not find the features they require for their specific life situations.
Interestingly, consumers who are offered such coverage almost always obtain it, according to data from the Bureau of Labor Statistics. As of March 2018 - the latest period for which data is available - 60% of civilian consumers have at least some access to employer-sponsored life insurance, and 59% take advantage. While local and state government employees are far more likely to be offered such coverage (98% of the time) than those in the private sector (57%), the engagement rate is the same across the board: 49 out of every 50 people get group life insurance when available.
Clearly, then, people understand the value of life insurance coverage, but individual policies have a significantly lower take-up rate. With sales flattening so far in 2019, it's important for insurers and brokers to make sure people know what their options are and how they can help people meet their short- and long-term financial goals.