Charting the course of life insurance

By John Forcucci

September, of course, is Life Insurance Awareness Month. While this designation invites us to revisit the state of life insurance at this time every year, this year — more than most — warrants that attention.

COVID-19 brought the need and awareness of life insurance to a crescendo. However, that interest has waned over the past year or so. Life insurance premium rose 18% in 2021, both because of the pandemic and due to tax law changes allowing higher premium per dollar of death benefit to qualify as life insurance — and it continued to rise 11% in the first half of 2022.

In fact, the tax law changes spurred what LIMRA saw as mainly a one-time increase, and demand for life insurance may already have started its decline despite the rising numbers.

As we roll through 2023, we follow a multidecade decline in the number of families covered, which reached a high at 85.4% in 1971 and decreased to about 60% in 2022. Following three straight quarters of declining sales, life insurance started to make a recovery in the second quarter this year, with LIMRA reporting $4.04 billion in new premium, a 2% increase.

There are a couple of factors at play here. One is that a large portion of the country remains underserved when it comes to life insurance. The second is that insurance companies have started marketing their products more as investments than as death protection. This investment focus, of course, means targeting more affluent consumers with higher-face-amount policies.

Rising interest rates have not helped life insurance in the same way they have helped other investment products, according to Wink’s Sheryl Moore

“My take is that the life insurance products haven’t been able to take advantage of increased rates as much, just because they primarily use portfolio crediting rather than new money,” Moore explained.

But there are bright spots. Indexed universal life, for example, continues to be very popular, holding 22% of the total individual market in 2022 — although regulators continue to monitor IUL illustrations.

Combination life insurance/long-term care products are also beginning to materialize. This is hardly surprising, given the great concerns about longevity and the need for long-term care, along with rising fears that retirement funds may be inadequate due to recent inflation and market volatility.

Finally, the annuity market has heated up to supernova level with the rise in interest rates, along with those concerns about meeting retirement needs. Annuities certainly have taken some of the funds that might have otherwise gone to life insurance premium.

With all these parts in motion, it will be interesting to see how life insurance continues to evolve over the rest of this year.

Expanding InsuranceNewsNet’s online experience

As part of our continuing efforts to serve our readers both through this magazine and on InsuranceNewsNet.com, we recently introduced several new sections on our website that we believe will provide additional content useful to our readers.

First, we have created a Companies section, which provides the latest news about some of the most important companies in the insurance industry, as well as individual pages that highlight some of the companies.

Second, we have created an Earnings section, where you can easily find the latest quarterly earnings news from top insurance companies.

Finally, we have added a Video section, where we will produce and add videos to highlight important and newsworthy conversations in the industry. Recently, for example, we covered the National Association for Fixed Annuities’ Annuity Leadership Forum and produced nine video conversations with some of the luminaries attending. We will continue to produce videos to make it easier — and more engaging — for our audience to follow insurance industry news.

John Forcucci
Editor-in-chief