Interest rates, AI usage among factors to drive whole life insurance growth

Whole life insurance sales are expected to increase in the months ahead due to a combination of industry trends and changing economic conditions, according to insights from LIMRA.

In a recent webinar, LIMRA representatives discussed in depth some of the factors that will drive this growth, as well as some of the challenges insurance carriers and agents will have to contend with to maximize the growth potential.

“We’re finalizing our forecast now — don’t have it quite yet — but I think things are going to be looking up for whole life over the next few months and through the end of this year,” Karen Terry, assistant vice president and director of LIMRA Insurance Product Research, said.

“We’ve had some recent news around interest rates dropping, lower inflation starting to kick in a little bit, economic conditions continue to be pretty strong. So, there’s a lot that’s going to be impacting our sales going forward,” Bryan Hodgens, senior vice president and head of LIMRA Research, added.

Life insurance trends to date

Life insurance sales experienced record growth during the COVID-19 pandemic. Based on annualized premiums and policy count, sales jumped from $13.5 billion in 2019 to $15.5 billion in 2022 and an even higher $15.7 billion in 2023, according to LIMRA’s data.

At the same time, indexed universal life products also grew steadily over the past few years, representing just 12% of the market in 2012 but increasing to 25% year-over-year in 2024.

However, that trend has slowed down. LIMRA found that life insurance premiums are overall down around 1%, and around 4% for whole life products, for the first half of this year.

Shifting economic conditions

Despite the recent falloff, LIMRA projects term life insurance sales to remain steady for the remainder of the year while whole life insurance growth rebounds due to lower interest rates and lower inflation.

“We’re expecting to see a return to growth in whole life insurance. With interest rates going back down, that relieves a little bit of pressure in terms of competition with other products,” Terry said.

She acknowledged that while lower interest rates can have some negative impacts, such as being “tougher on dividend scales,” it will have an overall positive impact.

At the same time, she pointed out that favorable economic conditions such as lower inflation and low unemployment will also mean more consumers are able to afford life policy premiums.

Innovation will drive growth

From an industry perspective, LIMRA suggested product innovation and use of artificial intelligence will help drive life insurance sales going forward.

Terry highlighted new simple, guaranteed issue products and combination products for life and long-term care as key examples of the kind of product innovation that will propel future growth.

“To the extent that we can develop those products that are easier to understand and quicker to apply for, I think that’s what we’re seeing really driving some of the growth in whole life at the moment,” she said.

At the same time, she suggested the insurance industry has only just begun “scratching the surface” of AI’s potential “make insurance carriers and those of us who work for them, agents and advisors, better at what we do and better able to help consumers.”

Challenges lie ahead

Although life insurance sales are on a positive growth trajectory, Hodgens and Terry cautioned agents to still be aware of trends that could affect their sales, such as:

● Increasing use of social media
● Untapped underserved markets
● Insufficient agents or inadequate training

LIMRA noted that younger Americans are using social media to explore life insurance, yet they still want to speak with an actual advisor when buying a policy. Terry suggested that social media is an underutilized resource the insurance industry should tap into more in the future.

Advisors were also encouraged to think about underserved market demographics such as immigrants and women, and to be aware that young Americans are putting off some of the key milestones where they would traditionally buy life insurance — such as getting married or buying a house.

However, both Hodgens and Terry emphasized that the most important aspect of these challenges is in having enough life insurance agents to support future growth.

“Product innovation will drive sales for a product for a while, [but] I think really to grow going forward, we need to address…the fact that we have fewer people selling our products,” Terry said.

Hodgens said LIMRA has seen a trend of significant investments into the distribution of forces, recruitment efforts and the use of digital to connect with clients and also train agents.

“Recruiting new agents into the industry, into the space, is certainly something top of mind for a lot of carriers for the industry… I do see a trend there and I would encourage everybody in the industry to continue pushing on that,” Hodgens said.

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