The past several months have been trying for hundreds of millions of Americans in one way or another, and these types of trials and tribulations tend to help people put things in a new perspective. That certainly seems to be the case when it comes to how people view life insurance as a vital part of a long-term financial plan, especially because the deadly effects of the novel coronavirus pandemic continue to grab headlines.
Indeed, more than 1 in 3 consumers in a recent survey from the Lincoln Financial Group indicated they increasingly view life insurance as being more important than they used to, and about the same number are planning to buy individual coverage as a consequence. This is sure to be a welcome trend among life insurers, which have long hoped to create more connections with potential policyholders. The pandemic has created a greater impetus to do so.
Another avenue that is likely to serve both consumers and insurers well is something that has been worked on within the industry for some time: online shopping and applications processes. The Lincoln Financial survey also found that 29% of respondents — including 2 in 5 millennials — say they are more likely to buy life insurance when they can do so electronically.
That survey comes in addition to polling from LIMRA, which found that 58% of those polled said they were aware of how important life insurance is, up from just 49% in March. However, the data suggests the people most likely to see the efficacy of buying more coverage were those who already had it (64%) versus those who currently do not have life insurance (51%).
Furthermore, the recession that has accompanied the pandemic also obviously makes it more difficult for even those who recognize the value of life insurance to follow through on their need to make a purchase. For instance, 47% of respondents said their insurance bills have generally become more difficult to afford amid the economic downturn. While that number is much improved from March (when it was at 58%), it's still a concern. About 1 in 6 consumers polled said life insurance in particular would be difficult to afford right now, including 1 in 5 that already have coverage.
Consumer perception about their finances is generally getting better; fewer are worried about losing housing, falling behind on day-to-day expenses, job security and so on. Alison Salka, senior vice president and head of LIMRA Research, noted that even still, fewer than half of all Americans currently do not have life insurance coverage and many of those who do still don't have enough to adequately meet their long-term financial needs.
Starting the conversation
If recognition of the need for life insurance is just one step toward increasing ownership, it's an important one. In many cases, the next step is having a conversation about such coverage, and a Life Happens poll finds such discussions are becoming more common as well. Two-thirds of respondents to a July survey said the current situation has been a "wake-up call" as it relates to their finances, and fewer Americans attest to avoiding important financial conversations these days. As it relates to long-term planning, 1 in 3 respondents say they've talked about their wills or inheritance plans in recent months, just ahead of the 30% who say they've had direct discussions about life insurance.
The pandemic has fundamentally shifted consumers' habits with regards to affording coverage. Almost half say they've cut back on spending and 45% say they've focused on building savings. Another 1 in 4 indicated the crisis caused them to buy life insurance for the first time.
Unfortunately, some decisions haven't been as positive: 43% say they've had to delay their planned retirements, and 37% have had to dip into their retirement savings to make ends meet. When asked how long it would take for people to feel confident about their financial status once again, the average answer was 8.5 months.
Meeting the need
The question, then, is whether life insurers are doing all they can to make sure they're rising to meet consumers' preferences around applying for a policy, whether it's for the first time or to add to their current coverage. Forbes insurance analyst Amy Danise notes that newcomers in particular may not know what to expect from the application process (such as whether a medical exam will be required) and as such, need as much information as possible to make the right decisions and get through that process as quickly and easily as they can.
With more people — particularly younger adults — now expressing an interest in coverage, insurers cannot leave themselves unprepared to accommodate interested consumers' needs. This could be the beginning of a decades-long relationship, and the more that can be done to forge trust and comfort initially, the better off that relationship will be in the long run.