Lewis & Ellis, LLC

Life insurance applications start 2021 on the right foot

Life Insurance and Annuities
by Tim DeMars
Life insurance applications start 2021 on the right foot
Life insurance applications start 2021 on the right foot

While there were a lot of ups and downs in 2020 to say the least, one industry that was able to establish a series of positives throughout that tumultuous year was life insurance. Now, it seems that 2021 is picking up where last year left off.

Through the end of January, applications for life insurance ticked up 3.9% in comparison with activity in the same month in 2020, driven largely by older millennials and younger Gen Xers, according to the January MIB Life Index. Indeed, the age group of 31-50 increased application activity by 8.5%, driving the vast majority of the industry's growth for the first month of the new year.

However, that doesn't mean other age groups weren't more interested in life insurance to start the year. Both the 0-30 and 51-60 demographics saw year-over-year growth, of 3.7% and 2.9%, respectively. The only age groups that saw a decline were 61-70 (down 1.8%) and 71-and-up (a decline of 10.9%). Interestingly, a lot of these changes end up leaving January's changes more or less in line where things were in August, down from recent activity highs seen more or less across the board in September and December, but up from recent lows observed in October and November.

More young people are making the move to obtain life insurance.More young people are making the move to obtain life insurance.

The big driver
It should come as no surprise to anyone who has been paying attention to the industry since the nationwide lockdowns began that younger people in particular are increasingly interested in life insurance. That's a trend that has been evident for some time amid the novel coronavirus pandemic, and experts say it's not showing any signs of slowing down.

The Wall Street Journal recently reported on this issue, noting that while the industry as a whole saw strong growth over the course of 2020, more granular data suggests the shift toward serving younger applicants has been significant. One major life insurer said its average buyer in 2020 was a 40-year-old man obtaining 20-year term coverage worth about $500,000, and that it saw applications from 40-and-unders increase 25% on an annual basis.

A big part of the reason so many younger people are buying life insurance likely goes beyond just the growing need for financial insulation that was made obvious by an outbreak and economic downturn. Over the past several years, many insurers have also made the judicious decision to start broadening their online channels to allow people to sign up more easily — without an in-person meeting. It's easy to see why this would probably be uniquely appealing to younger applicants, but even if many young people didn't take insurers up on the opportunity in the past, 2020 certainly created the conditions insurers had been preparing for.

Other positive changes
An object lesson in why digital growth was so important for insurers over the course of the pandemic comes from Principal Financial Group, which recently announced that it had received a company record number of applications for life insurance in 2020.

What's more, the number of applications received through digital channels grew threefold from what it saw in 2019, Moreover, almost every policy the company issued last year was delivered electronically.

With younger people in particular likely favoring digital channels for obtaining and managing their life insurance, it's worth noting that the policies that will typically appeal to them most — term coverage — drove a lot of the company's sales. In all, term policies accounted for roughly $100 million in sales, a business record, making up about 45% of total individual life sales in 2020. The company credited that increase largely to its push to make it easier for people to apply for coverage, and to accelerate and simplify its own underwriting efforts.

What comes next?
For years, life insurers have bemoaned the lack of uptake from younger people, especially in comparison with the policy activity of previous generations when they were the same age. And while few would have predicted that a global pandemic would be the inciting event that caused a huge surge in sign-ups, insurers aren't likely to see a decline in such activity anytime soon.

In an exploration of industry trends, Investopedia notes that the pandemic is hardly sorted out as March begins, and as such, consumers who have yet to reach their 60s are likely to keep driving demand for some time to come — potentially for the entirety of 2021 and beyond. It should be noted that things were generally on the rise for the life sector even before the pandemic hit, but the outbreak certainly kicked activity into overdrive. As such, even if things simmer at a pre-pandemic level in late 2021 or, more likely, 2022, many companies will still be in a strong position going forward.

Life insurers should prepare themselves for these eventualities and, simultaneously, continue to make it easier for people of all ages to seek or manage life insurance policies via digital channels going forward.



Consultants to Contact