Life insurance buying spree continues under COVID

One of the biggest trends seen among consumers as they adjusted to their “new normal” during the novel coronavirus pandemic was that they largely became far more interested in buying life insurance. It should come as little surprise that any individual's own mortality and long-term financial security should be front of mind amid a global health crisis and economic downturn, but underwriters certainly need to be aware of this ongoing — and potentially growing — trend.

First and foremost, life insurers need to recognize just how hard and fast the wave of what experts are calling “panic buying” has become. CNBC notes that web searches for the term “life insurance” increased 50% from March, when the virus really took hold in the U.S., to May and that's largely translating to sales. A number of the nation's largest insurers say their sales numbers have increased sharply, with some reporting sales growth of as much as 30%, but industry-wide trends are lagging those numbers, pending data from the third and fourth quarters of the year.

In particular, though, it seems that the need for a solid life insurance policy is finally sinking in for the demographics underwriters have long been trying to crack: millennials and Generation Z. MIB data shows that applications among people under the age of 44 were up nearly 13% on an annual basis in the third quarter, and even Gen-Xers increased their application activity by 9%. In most cases, term life insurance seems to be the preferred financial vehicle for those now seeking policies, either for the first time or to increase their coverage.

More Americans are now willing to take the plunge with life insurance.

More sales data
During the second quarter of the year, total new policy sales for individual coverage increased 2% year over year, though premiums fell 5%, according to the latest data from LIMRA. Elaine Tumicki, corporate vice president for LIMRA Insurance Research, noted that this came despite the fact that people were largely confined to their homes and thus unable to purchase or even inquire about coverage in face-to-face settings. Instead, they relied on online application and approval processes, and insurers worked hard to broaden those options for interested consumers.

“As a result, direct-to-consumer sales propelled the growth in whole life policy sales but declines in other distribution channels muted the extent of this growth,” Tumicki said.

And while premiums were down for all coverage types, this seems to have been driven by sharp declines for whole life and universal life policies. Interestingly, variable universal coverage ticked up sharply, though these policies are offered by relatively few insurers.

Again, this all comes with the caveat that experts believe many of the above figures will surge when third-quarter numbers are released later in 2020.

Cost considerations
Unfortunately, the people who seem to be facing the greatest risk as a result of the COVID-19 pandemic are also those who are least likely to actually have coverage. Industry analysts now say that insurers have reduced exposure estimates by as much as half simply because many of the people who are now dying from COVID-19 and its related complications just didn't have life insurance in the first place, The Wall Street Journal reported.

Speaking broadly, the two demographics most likely to face serious health concerns and even death from the coronavirus are the elderly and racial minorities. Even those elderly people who do have some sort of life insurance coverage tend to have lower-value policies than those who are still working, and these people represent roughly 4 in every 5 of the more than 200,000 COVID-19 deaths in the U.S. to date.

Likewise, non-Hispanic Black people — who make up roughly 13% of the U.S. population — have suffered about 20% of total COVID-19 deaths nationwide, and this is another group that tends to be disproportionately underinsured.

Another reason for insurers to have a slightly better outlook for exposure, however, is that older people who are now dying due to complications from COVID-19 may have been considered likely to pass away from more natural causes in the relatively near future. That is to say, because COVID-19 disproportionately affects the elderly, who have shorter life expectancies to begin with, life insurers may not be as deeply affected as they might have initially expected.

The coming wave
Life insurers should certainly not assume interest in their offerings is going to wane any time soon. A recent Unum survey found that 22% of Americans now say they are considering increasing their life insurance coverage amount at some point before the close of 2020. More than double that number said they either don't know how much coverage they have, if any, or definitively know that they do not.

Breaking it down demographically, there is a greater-than-average interest in obtaining more coverage among a number of groups. These include millennials (30%), Zoomers (38%), Black and Hispanic adults regardless of age (36% and 38%, respectively), and households with kids (34%).

With all of this in mind, it's important for insurers to make sure they are adequately set up to handle the potential increase in consumer interest that could still come, among all demographics.