Ownership Tilts to Broader Mix of Life Products

By Cyril Tuohy InsuranceNewsNet

Among households owning individual life insurance policies, a record 30 percent own a mix of term and permanent life, an increase of 12 percent in six years, a new life insurance trends ownership survey found.

Only 44 percent of households own individual life insurance products of any kind and it is the first time that life insurance owners are more likely to own term than permanent life (68 vs. 62 percent), LIMRA’s 2016 U.S. Individual Life Insurance Trends survey found.

The change in the ownership mix should be of interest to agents since most people across all age groups prefer to buy their life insurance in person from an agent.

Term insurance offers more coverage for the dollar than a permanent life policy, which could account for the shift, said Jim Scanlon, senior director of LIMRA Insurance Research.

A Sign of Broadening Demand

If the overall life insurance market isn’t growing as fast as the industry would like, households owning a more balanced mix of term and permanent life insurance is at least a signal of a broadening market, he said.

A strong market for term and permanent life is “not a bad thing,” he added.

The 2008-09 financial crisis may have been an inflection point as it lowered disposable income and the subsequent interest rate collapse tarnished life insurance account values, Scanlon explained.

Cost-of-living increases and higher amounts of household debt could have also contributed in nudging consumers to favor term life policies.

But with interest rates on the rise, household life ownership trends could shift away from term and toward permanent life again as rates boost cash values in those contracts, he said.

Survey results were based on a sample of 4,167 households.

Overall, a Stagnant Pie

With growth of overall life insurance stagnant, the household mix of term and permanent life coverage appears to have delivered a tale of two product segments seemingly resigned to fighting over market share.

Annualized premium growth in 2016 for universal life was flat compared to 2015, LIMRA’s U.S. Retail Individual Life Insurance Sales Summary Report indicated.

Premium growth for variable universal life declined 11 percent in 2016 compared to 2015, LIMRA reported.

The bright spot was annualized premium growth for whole life, which rose 9 percent in 2016, LIMRA reported.

Annualized premium growth for term life, the simplest, most affordable and commodified type of life insurance product, rose only 1 percent in 2016 compared to 2015, LIMRA added.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].