Health & Life Insurance Actuaries | Lewis & Ellis Inc.

Who's buying life insurance these days?

Life Insurance and Annuities
by Tim DeMars
Life insurance is valuable in many ways.
Life insurance is valuable in many ways.

In recent years, the life insurance industry languished under the weight of a still-recovering economy that saw many Americans prioritize other aspects of their financial health over the sector's valuable offerings. But more recently, the tide has begun to change as the labor market hit levels never before seen and continues to hover in a strong position. As a consequence, life insurance companies largely saw a noteworthy 2018 and similar results may be in the offing for 2019 as well.

Indeed, life insurance premiums ticked up about 1 percent on an annual basis over the course of 2018, according to the latest U.S. Retail Individual Life Insurance Sales Survey from LIMRA. That was the fifth-straight year in which life insurers saw premiums rise, even if they flattened out year over year in the fourth quarter of 2018.

Meanwhile, the number of new premiums written in 2018 was effectively unchanged from either 2016 or 2017, indicating that roughly the same number of new policies have been opened annually for three years straight, but that their dollar value is on the rise, the report said.

Life insurance premiums continue to outperform the previous year.Life insurance premiums continue to outperform the previous year.

A closer look
On a more granular level, it seems that new premiums for variable universal life insurance was the big performer for underwriters last year, rising 14 percent annually and 15 percent in the fourth quarter alone. This type of coverage now makes up about 7 percent of all individual life insurance policies in the U.S.

On the other hand, whole life premium growth remained flat for both the fourth quarter and entire year, the report said. This kind of policy still represents more than a third of all life insurance nationwide. But the biggest driver for the sector over the course of 2018 - by a wide margin - was indexed universal life, which rose 9 percent for the year and 4 percent for the fourth quarter. It made up nearly a quarter of all individual life premiums, the record since at least 2006, when LIMRA began collecting this data.

Similar findings
At the same time, the latest Sales and Market Report from Wink's showed much the same results, both in the fourth quarter of 2018 and for the full year. In particular, the report highlighted strong performance from indexed life offerings, which surged 16.8 percent from Q3, and 7.2 percent year over year. This brought sales of the product to more than $2.1 billion for the year, a record stretching back at least 10 years, thanks to more than $617 million in premiums coming in during the fourth quarter alone.

"Sales of indexed life offerings surged 7.2% year over year."

"Given the recent trends in indexed life product development, it is no surprise to see both a record quarter and a record year for indexed life sales," explained Sheryl J. Moore, president and CEO of both Moore Market Intelligence and Wink, Inc.

Other types of coverage examined - whole life, fixed universal life, and nonvariable universal life were more of a mixed bag, often rising on a quarterly basis but declining a bit annually, the report said.

What's happening now?
The question facing both brokers and life insurers is who's buying all this coverage, because the number of new policies isn't budging much from before the economy started taking larger steps forward, but investment in coverage certainly is. And because of the variance in performance of certain life products, it's vital to identify likely buyers on the basis of which products they may be most likely to be interested in.

Everyone in the industry may have an "ideal" client in mind, but who that is can be quite wide-ranging depending upon a number of factors, according to a panel of experts convened by Insurance Forums. Some brokers may find that it's easier to connect with people in their specific age group (perhaps plus or minus five years or so), while others are looking for people with more specific demographic profiles but without the age specificity (such as well-off married individuals with children). Others may want to target people who have very specific kinds of plans for what they will do with their coverage.

"In regards to financial planning they would want to build a progressive, long-term relationship with an adviser they like and trust, someone they know they could refer with confidence," Sandro Forte, a financial planner, told the site. "They see the benefits of inter-generational planning, recognize the value of financial advice and take accountability for their own decisions by seeking to become better informed and educated."

However, there has been an increased focus on younger people in the industry for obvious reasons, and that also means adapting to the differences between generations, the report said. Simply put, baby boomers came of age at a time when the economy's inner workings were quite different from today, so products that might have made sense in the 1970s or '80s might not appeal to millennials or, a few years from now, to those in Generation Z. So while there may always be "ideal" qualities for any person buying life insurance, what they want - and how they plan to achieve those goals - aren't so hard and fast.

Those offerings, of course, include term life, which is growing increasingly popular, especially among young people who may not have as much disposable income as their older counterparts.

"More small businesses may now be relying on life insurance."

Another avenue
In an entirely different area of growth, it seems more small businesses may be increasingly relying on life insurance to protect themselves from financial risk in the event of the untimely death or disability of an owner or executive, according to Smart Business. Jim Altman, a banking executive in Pennsylvania, noted that in many cases, smaller companies run into major issues if someone who does a large percentage of the heavy lifting in its day-to-day operations is no longer able to perform those duties.

In addition, if companies have multiple shareholders who retain large percentages of the business, life insurance can help insulate the other shareholders and the company itself from financial risk, the report said.

"In the event that one shareholder dies, life insurance becomes a funding mechanism for the remaining ownership to purchase the deceased partner's shares," Altman told the site. "Without this protection, the existing shareholders or the company may be forced to buy the shares with their own cash, depleting valuable liquidity unnecessarily."

Of course, it's incumbent upon both brokers and insurers to help their clients find the absolute best coverage for them based on unique financial and life needs. The better both sides do coming to an understanding of what kinds of policies will work best, the better the chance they will be able to enjoy a fruitful, long-term relationship.

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