For nearly two years, consumer concerns about COVID-19 and the economy went hand in hand.
However, the two concerns diverged more recently as fears about the virus waned this year and the flailing economy took center stage.
LIMRA’s quarterly Consumer Sentiment in the Time of COVID-19 study found only 29% of Americans expressed a high level of concern about COVID-19 in July 2022, down from 50% just six months earlier. In contrast, 63% of consumers said they were highly concerned about the economy. This is 13 percentage points higher than at the beginning of the year. Only 15% of adults have a favorable opinion of the economy today, the lowest sentiment we’ve captured during the pandemic.
Understandably, people with high levels of stress over their household finances (74%) and those anticipating increased financial stress this year (85%) expressed the most concern about the economy.
With inflation at its highest level since 1982, virtually every American is concerned about it to some degree. Inflation appears to be a prime driver behind the anticipation of increased financial stress. Nearly 9 in 10 people who expect their financial stress will increase (further) in 2022 say inflation is a major concern.
In recent months, a majority of Americans have taken action in response to the current economic climate. Nearly 9 in 10 adults took favorable actions — steps that are likely to improve their financial stability and security — such as being more budget conscious, saving or investing more, and taking steps to increase their income. In an effort to make ends meet, however, nearly 3 in 5 adults have taken “unfavorable actions” that can be more detrimental in nature, such as saving less, increasing one’s debt, cutting back on retirement contributions or skipping medical care.
Most consumers have made changes to their spending in recent months. The most common include cutting back on dining out or entertainment, changing their shopping habits, and driving less. Other changes, such as putting off a major purchase, canceling subscriptions or memberships, and changing or canceling vacation plans are likely to increase if economic conditions don’t improve.
Household finances top the list of what’s causing stress today, followed closely by work. Both have reached or surpassed their pre-pandemic levels. Half of adults expect their level of financial stress to remain about the same over the next six months, while a quarter expect it to worsen and a quarter expect it to improve.
Consumer confidence in carriers and agents remains high
Other LIMRA research shows that people who own life insurance feel more financially secure. Two-thirds (68%) of life insurance owners report that they feel financially secure, as compared to 47% of non-owners. Although consumers in the current study are making some difficult choices with their finances, very few (only 1%) say they’ll be likely to reduce or cancel their life insurance coverage or put off buying coverage they feel they need (2%) if economic conditions don’t improve this year. At the same time, very few adults say poor economic conditions would motivate them to buy life insurance in an effort to reduce their risk (1%).
Levels of confidence in various segments of the financial services industry have dipped since January, but are similar to where they were before the pandemic, in January 2020. Nearly 1 in 3 Americans has “quite a bit” or an “extreme amount” of confidence in insurance companies today, and nearly 9 in 10 have at least “some” confidence.
Consumer confidence in insurance agents and brokers accelerated during the pandemic and remains higher than levels consumers felt at any time since the 2008 Great Recession. Confidence in financial advisors also improved significantly during the pandemic and is well above pre-Great Recession levels.
Given consumer confidence in our industry, the current economic uncertainty provides the perfect opportunity for life insurance carriers and advisors to educate consumers about the importance of life insurance and the financial security it can provide for today and for generations to come.