This article first appeared in sister publication FA-IQ Life Annuity Specialist.
Life insurers are working to counter a worrying trend: the erosion of policy ownership among Americans despite what industry providers say is a growing need.
This year, 50% of U.S. consumers had a policy, individual or employer-sponsored, according to Lima, the largest trade group in the industry. That’s down from 52% in 2021 and 63% in 2011.
The erosion of ownership was partly camouflaged by the overall rise in sales, which climbed 6% in the second quarter, as measured by the new annualized premium, the trade group reported.
The number of policies sold, however, fell 11%.
“The number of policies is decreasing,” said Parag Shahvice president of product design at Pacific lifespeaking during a session at the Limra conference in Chicago on October 17.
Shah said group life insurance sales are weaker than individual sales, reflecting the fact that many people have moved into the more precarious gig economy.
The big question posed at the Limra conference: how do insurers reach this uninsured half of the American population?
“We have tons of needs,” said Francois Radnotiproduct manager for Protective life, “But I think we have to create demand.”
Low income life insurance
Shelly Habecker, responsible for the sustainability of life and health for Swiss Re Americas and speaker at the Limra conference, said the life insurance industry could grow by customizing its products for low-income customers.
“If we continue to focus only on the high end, we will only become a luxury product for a small segment,” Habecker said in an interview. “We are missing a huge business opportunity by not serving half the market.”
She said low-income shoppers have expressed demand for life insurance, as sales data for different ethnic groups shows.
According to Limra, black Americans have historically purchased life insurance at higher rates than other groups, including whites. Limra said 55% of black people have life insurance in 2022, compared to 51% for whites, 52% for Asians and 42% for Hispanics.
The median annual income of Americans is $67,000, but that of blacks is $45,000, according to Habecker, a former professor of anthropology at george washington university. She said they were buying cheaper policies that provide less coverage, and the life insurance industry can learn from this by creating lower-cost products for the uninsured 50%.
“We should look at emerging economies to find out what they are doing,” she said, referring to “microinsurance” programs offered by insurers in other countries.
What the products would look like
For example, Habecker stated that Swiss Re had partnered with Prudential Financial and Mercardo Book, an online retailer in Brazil, to provide low-cost life insurance to Brazilians. Swiss Re has also launched a pilot program for Ghanaian immigrants to the United States, selling coverage for family funerals. In Egypt, Swiss Re has partnered with Axa offer borrower insurance that covers micro-loans for low-income women.
She said some life insurers have partnered with American brands that serve low-income Americans, citing Protective Life’s partnership with Costco and MetLifepilot program with walmart.
Yang-Yangresponsible for the analysis of life for Verisksaid Americans who lost their jobs during the pandemic and entered the gig economy could be a receptive market for life insurance, as they previously had group life insurance coverage in the under their former jobs.
“These people are a very good opportunity for insurers,” Yang said in an interview. “So how do you reach them? »
She said the products should be suitable for site workers who have never experienced underwriting before, because when they used to have cover it was group life through their old jobs.
“You have to make sure they get everything they need in one package, one package,” she said.
She said packages for construction workers could include disability insurance as well as life, with face values two or three times their annual income.
A Limra report showed that premiums are increasing even as the number of policies sold decreases. On Sept. 13, Limra said annualized new premiums rose 6% in the second quarter, but overall policy sales fell 11%.