Booming sales could be even better, Levenson says

Even though life insurance products, especially annuities, are having their best year ever, there is still an enormous demand out there.

That is a key theme that LIMRA and LOMA CEO David Levenson planned to focus on in his opening address today at the association’s 2022 annual conference, LIMRA’s first in-person annual since 2019.

Although life policy sales have slacked toward the end of the year, sales will end up being a record-breaker overall, Levenson said in an interview before the conference. LIMRA estimates annuity sales will be more than $300 billion this year, at least a 17% increase over 2021, itself a record year.

But even with that burst of sales, there is still even greater demand out there.

“We still have 106 million uninsured or underinsured people in this country,” Levenson said. “Next year will be the first year that the number of insured adults in the United States drops below 50%.”

Half of those folks plan to get an insurance product in the near future, according to a LIMRA/Life Happens study, Levenson said.

“We've got to find, as an industry, new and different ways to reach these individuals to satisfy the demand,” Levenson said. “We need more financial security professionals that use life insurance and annuities as part of their solution set.”

Great conditions, but fewer sellers

The pandemic was a wake-up call for Americans to seek protection products, accelerating demand starting in 2020. Now this year finds a new dynamic, rising interest rates. Traditionally, fixed deferred annuity rates have lingered just above CD rates – until this year, Levenson said.

“The average three-year fixed annuity toward the end of the second quarter of this year was paying about 3% while the average three-year CD was paying about 64 basis points,” Levenson said. “So, we have not seen that significant gap in a long time.”

That trend is expected to increase because bond rates have been rising steadily with the Federal Reserve’s fund rate increases. The 10-year treasury is yielding about 4% for the first time since 2009.

Not only are annuities more attractive, but consumers are also ready to hear about them. LIMRA polling found that 47% of the public recognized that they need an annuity, Levenson said.

“We've got to find new and different ways for more financial security professionals to reach consumers who believe that this is a good product for them,” Levenson said, adding that it has been a central issue in the C-suite. “We still have this war for talent, which is very real.”

Distribution has been one of the key hurdles to meeting the demand. The number of producers licensed to sell life insurance has hovered around 325,000 for the past few decades, while the general population grew. The primary growth in life distribution has been in the brokerage general agencies and independent marketing organizations.

Another channel that carriers have been interested in is direct to consumer. Although companies have been talking about opening that route, it has actually narrowed from 6% of all life insurance sales in 2016, to about 5% today, Levenson said, adding that he is confident that the industry will grow that channel.

Workplace evolution

Another significant change over the past few years is in the workplace, for both the industry’s workers and the workplace market.

Companies and distributors have learned to create and reshape the work environment, principally around remote working.

“Our industry was pretty effective getting everybody back to work in a in a remote environment,” Levenson said of the early reaction to the pandemic. “Most of the industry now is under a hybrid work model. Most employees are working remotely, at least one day a week. Getting senior leaders and middle management and employees all used to that is a significant effort.”

That is critical to keeping employees happy. What is important to getting new people into the business is emphasizing the sense of helping others, Levenson said.

According to LIMRA research, the top reasons for becoming a financial professional are the opportunity to make a difference in people’s lives (30%), income potential (25%), and work/life balance (17%).

Once on, financial professionals want to get going quickly and learn the ropes.

The workplace is also an increasingly important market for sales.

“If you compare today versus pre-pandemic, there's much greater employee and employer demand for our products and solutions,” Levenson said. “As an example, if you look at the millennial generation, 47% of millennial employees believe that workplace benefits are more valuable today than they were pre-pandemic.”

And their bosses agree – 97% of employers said they feel in some way responsible for their workers’ financial wellness, Levenson said. That compares to 14% a decade ago.

But despite those sentiments, access is still limited. Life insurance is the most popular employee benefit, besides health and retirement benefits, but only 63% of employees have access to it, Levenson said. Only 40% have access to disability benefits as well.

Levenson said the conditions are right for further dramatic growth: “There is significant demand for our solutions at the consumer level, at the family level, at the employer level, at the employee level.”

Steven A. Morelli is a contributing editor for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].

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