Life Insurers: Lessons From The Past, Looking Toward The Future

Will the life insurance industry see a repeat of what happened after a historic pandemic swept the world about a century ago?

As life insurers ride a wave of increased sales in the wake of COVID-19, one industry leader looked to the Spanish flu pandemic of 1918-19 and expressed his hope that a post-pandemic sales slump won’t be around the corner.

COVID-19 made consumers more aware of their mortality and more aware of why they need life insurance. The result: in the first half of 2021, life insurance sales reversed a decadeslong slump to rise to their highest level in nearly 40 years. In the first six months of 2021, the total number of policies sold increased 8%, compared with prior-year results. This is the highest policy sales growth recorded since 1983.

But can the industry keep that momentum going in 2022? Or will consumers go back to complacency and reluctance about buying coverage?

John Carroll, senior vice president and head of LIMRA's insurance division, noted that the Spanish flu pandemic inspired a similar spike in life insurance sales followed by a sales slowdown in 1921-22. But he is optimistic that history won’t repeat itself as the world emerges from COVID-19.

“Our data tells us there are still a lot of people out there who are likely to buy life insurance,” he told InsuranceNewsNet. “There’s more of an awareness. People are seeing the value of life insurance.”

Life insurance sales will continue to increase but at a slower rate, Carroll said.
But COVID-19 will not necessarily be the driving force behind increased sales, he noted. Life insurers learned some lessons from the pandemic that will help make the life insurance purchase process easier for consumers and encourage more of them to buy.

“Insurers realized they have an opportunity to change the perception of our business and become much more client-centric,” Carroll said. “Insurers had to make advances in digitization, initially for survival. But now they realized this was great for business, great for our customers.

Now consumers can engage with us the way they want, and we can speed up the process. A lot of that is going to stick as we go into the coming year.”

Carroll cited research that found eight out of 10 insurers who implemented digital processes or strategies plan on expanding them in the future, and he predicted consumers will be the winners. “This is making the buying process easier and faster. Meanwhile, coverage remains cheaper than most people think it is.”

Product Trends: UL Products Catching Up

Carroll predicts growth in life sales across the board, but some products may see more growth than others.

“We see whole life and term continuing to grow but maybe at a slower rate than previously,” he said. “When you look at growth rates since 2020, you saw strong growth in digital products, especially term. But now you see universal life products catching up. So I think we’ll still see whole life and term growing — maybe at a slower rate than what they’ve been recently — but we do think they will be higher than pre-pandemic levels.”

Interest Rates Still Problematic

Low interest rates “are the headwinds that life insurers are facing,” Carroll said.

“But I think you’re seeing the industry continue to adapt and act on that,” he said. “It depends on where you sit in the industry. Some carriers have had to get out of certain lines of business. And you’re seeing private equity shops buying these blocks of business.”

Carroll was reluctant to predict where interest rates might be in the coming year, but an upward or downward rate spike “is never good for anyone because that means something’s wrong in the economy.”

“But if it’s a slow, steady trend upward, that’s good for the industry; it gives them more room to work.”

Appealing To Younger Consumers

How does the industry get young adults to buy life insurance? Although insurers made inroads with the millennial generation during the pandemic, Carroll said more needs to be done.
Increased digitalization is one way the industry can appeal to young adults, he said. “Making the process easier and faster and letting consumers engage with it where and when they want are the keys.”

The industry also must address misconceptions young adults have about life insurance, he said.

“Our studies show that young adults believe life insurance costs four or five times more than it actually does,” Carroll explained. “Many millennials believe they don’t even qualify for coverage. So the industry and advisors need to incorporate some talking points addressing those issues when they present life insurance to young adults. If you can couple that information along with increased digitalization, that’s how you get younger people to buy.”

As younger generations of adults hit many of life’s milestones — buying homes, getting married, starting families — more young adults will see the need for life insurance, Levenson predicted. “They’ll realize, ‘Life insurance serves a real purpose, I have a real need for it, it’s valuable to me and I need to get it.’”

The War For Talent Is Real

This past year was marked by what some call “the Great Resignation,” in which millions of workers changed careers, retired earlier than planned or left the workforce for other reasons. The life insurance industry is feeling the effects.

In his opening remarks at October’s LIMRA annual conference, David Levenson, president and CEO for LOMA, LIMRA, and LL Global, said about 17% of the industry’s employment base has been hired since the start of the pandemic, and carriers must be able to train and develop those new employees amid hybrid and remote work. Meanwhile, the industry must find talent to replace those workers who are looking to retire or change jobs.

Carroll echoed that concern, saying retention is as much of a challenge as is recruitment. And retention rates vary among carriers.

“Some companies are seeing better retention rates than usual, so fewer people are leaving than would normally do so,” he added. “But during the pandemic, some companies reported 30% to 40% turnover. One thing that tells us is that the ability for talent to connect to the firm and to be part of the culture is crucial, and it’s much more difficult to do when so many people are remote. So firms are really struggling with that.”

But other companies are finding opportunities in the talent wars.

“Some are saying the aspect of being remote and being more flexible can attract people to their company,” Carroll said. “Now they can hire people in Chicago, in New York or wherever for a company in wherever they might be. They’re seeing it as a real positive to attract talent.”

Insurance companies are competing with other sectors of the workforce for employees, and the industry must become more creative and flexible in attracting talent, Carroll said. “I think we will see a lot more around employee wellness and offering different benefits in an effort to win the talent games.”

Adapting To Regulatory Change

Although it’s not known what will happen on the regulatory front in the next year, insurance carriers will continue to adapt their products to work within those rules, Carroll said. And as of this writing, it’s unknown what tax changes, if any, Congress will approve next year and how those changes apply to life insurance sales.

Regarding any future tax changes or rule changes, Carroll said the core value of life insurance to middle-market Americans remains the same.

“Tax policies come and go, administrations come and go, but the fundamental need for life insurance and the opportunity to own it won’t change.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].