Private equity, artificial intelligence coming fast at life insurers: LIMRA CEO

The life insurance industry faces familiar challenges with talent shortages and how to meet the glaring product needs. Unlike the past, however, new tools and resources exist to change the narrative going forward.

Dave Levenson, CEO of LIMRA and LOMA, will address the great potential for positive change in a state-of-the-industry address today. The trade association's annual conference theme is "Innovate with Purpose."

The message will be upbeat, Levenson said in a preconference interview. After all, annuity sales are not only setting records but smashing them by leaps and bounds. . LIMRA research shows total annuity sales reached $215.2 billion in the first half of this year, representing a 16% increase over 2023 and setting a new sales record for the first six months of a year.

"The reason I think a lot of people remain bullish over the next several years is that when you compare three-year fixed annuities to three-year CD rates, the spreads between those products are still at the highest levels that they've been at in years," Levenson explained.

The SECURE Act of 2019 and follow-up SECURE 2.0 bill passed in 2022 included a host of measures designed to make it easier for Americans to put away money for retirement. Significantly, the changes allow workplace retirement plans to offer lifetime income annuities as investments and workers to directly transfer their annuities if they change jobs or lose their job.

"What we're finding is that, if you think about 401(k) plans, what they're really supposed to do is to provide guaranteed income for participants and the only product that can really do that is an institutional annuity product," Levenson said. "It's taken a while for this to happen, but now we're seeing a lot more innovation in the marketplace."

Big industry changes

On the life insurance side, according to the 2024 Insurance Barometer Study, more than 102 million Americans say they need life insurance or more life coverage. That represents a high-water point since LIMRA first started measuring life insurance need 14 years ago.

And that is where the new resources and technology come in. Levenson's address will focus on a couple of areas where the industry is seeing rapid investment and return on investment:

Private equity. According to the National Association of Insurance Commissioners, about 137 insurance companies are owned in whole or part by private equity firms, up 50% from 2018. That investment comes with plenty of concerns about responsible capitalization and offshore reinsurance deals.

As 2024 winds down, consumers are benefiting from higher annuity rates, and carriers are benefiting from an additional supply of reinsurance capital via private equity.

While NAIC regulators focus on the underlying assets backing private equity firms who own life insurance companies, Levenson is energized by the opportunities such investment presents.

Private equity investment makes the industry "better from a product development perspective," he said. "It's made the industry better from an investment in technology perspective. It's made the industry better from a business analytics perspective, especially around distribution, and it's made the industry, I think, more certainly more capable from the perspective of reinsuring large blocks of business."

Artificial intelligence. AI is well on its way to changing the insurance industry. But the technology comes with the potential for negative side effects in the form of discrimination and invasion of privacy to name two.

The industry wants to be able to show that it can regulate itself and use AI responsibly, Levenson explained. To that end, LIMRA created a committee comprised of 40 member companies to help the industry with governance, best practices and use cases.

A survey of the companies reveals that 47% believe AI will have a significant impact on the industry, with another 41% saying the impact will be moderate. Almost 29% had a flat AI spend this year, and next year, 71% will have a flat or just moderately higher spend, LIMRA said. In addition, nearly half (48%) have not yet implemented any type of employee training program on using this technology.

"I think when you deal with new technologies like artificial intelligence, it's really important to that everybody understands what are the good things that technology can do, what are the dangerous things that technology can do," Levenson said of the AI committee.

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