What's Ahead for the Life Insurance Business in 2021?
While overall sales of life insurance were stymied in the first half of 2020 due to the pandemic and accompanying shut-down, both term life and whole life products are expected to rebound in 2021 and onward. That trend will be aided by Covid-19 vaccine uptake and technological advancements that enable a smoother and more efficient application process. Here is what some industry experts expect to see in the coming year.
- The COVID-19 pandemic is likely to increase consumer demand for life insurance products in 2021 and beyond.
- Insurers are now doing a greater share of their business with less in-person interaction, a trend that may continue.
- Consumers are also expecting faster turnarounds, which is leading to more automated and accelerated underwriting by insurers.
- The price of insurance appears to have stabilized since the large increases at the outset of the pandemic.
A Continued Growth in Demand
"Since the onset of the pandemic, we’ve continued to see an increase in interest in life insurance across the industry as Covid-19 has put the question of mortality front and center for many,” Salene Hitchcock-Gear, Prudential Individual Life Insurance president, told Investopedia.
As economic conditions slowly improve post-vaccine and consumers “become more confident in their financial outlook, we believe life insurance sales will begin to rebound in 2021 and return to pre-pandemic growth levels in 2022,” Maureen Shaughnessy, an actuary with LIMRA Insurance Research, predicted in a November 2020 forecast.
Similarly, in a recent Lincoln Financial Group survey, more than a third of consumers said they think life insurance “is more important to own now due to the pandemic, while a third also said they have or are planning to purchase new or additional life insurance as a result of the pandemic,” notes Stafford Thompson, Jr., head of life product management for Lincoln.
Less In-Person Interaction
The pandemic has also had a major impact on how insurance is being sold.
Less than a third of people buying life insurance policies since the pandemic have done so solely in person, according to LIMRA. This compares with 44% who were buying life insurance policies in person before the pandemic, a spokeswoman for the organization says.
“Most of the sales that were previously made in person are now made as part of a hybrid purchase process, usually partly online and partly with a financial professional,” she says. These hybrid experiences are more popular among younger and middle-aged consumers as compared with older Baby Boomers, LIMRA found.
According to the LIMRA research, 98% of respondents from financial services companies say their customers increasingly want to shop online and use video engagement tools.
Prudential Financial, for example, says it is encouraging consumers seeking life insurance to research and buy online—whether they choose to purchase entirely digitally or if the sale is completed on the phone with the assistance of a financial professional. To reduce in-person appointments, Prudential has dropped its paramedical exam requirements for new life policies with a face value of $3 million or less in many cases.
A Need for Speed
In keeping with the move online, applicants also expect faster turnaround times now, LIMRA found.
According to the LIMRA/Life Happens 2020 Insurance Barometer Study, 50% of consumers say they are more likely to buy life insurance through automated or simplified underwriting than through the more time-consuming traditional underwriting.
Insurers are working to accommodate them, through a variety of means.
For example, Allianz Life Insurance Co. of North America, which sells fixed index universal life (FIUL) insurance, hasn't moved to automated underwriting but did accelerate its underwriting process, while also raising the limit on policies to $3 million. The accelerated process took off during the pandemic and now involves some 40% of its customers, notes Mike McCarty, who who leads Allianz’s annuity and life operations. He says the process currently takes about 10 days.
Where Rates Are Headed Remains Unclear
Some wonder if the arrival of the Covid-19 vaccine will mean lower policy rates, but, like many things with the virus, it is too early to say, according to Allianz’s McCarty. In Allianz's case, if an applicant has an active infection, the underwriting process will be postponed until they recover.
“Covid has required nearly all life insurers to implement temporary changes to their underwriting guidelines and processes. However, just having the virus does not necessarily impact an applicant’s rates,” says Heather Milligan, head of life underwriting and new business for Lincoln.
Like other insurers, Lincoln will postpone underwriting for someone who has or recently had Covid-19. If they suffer longer-term effects from the disease, that would be factored into the underwriting process, just like other medical conditions.
Milligan says that vaccination would not be a factor in the underwriting process, while Prudential’s Hitchcock-Gear says her company is “continuing to monitor ongoing developments related to the pandemic, including broad availability of the vaccine.”
Policygenius CEO Jennifer Fitzgerald sees prices stabilizing in the months ahead. While premiums shot up early in the pandemic, by late fall they were rising at close to pre-pandemic levels, she says. For example, rates for a 55-year-old male smoker went up only eight cents per month from October to November after a spike of $12.56 per month from September to October, Fitzgerald noted in a November data release statement.
LIMRA. "LIMRA Forecasts Rebound for Whole Life and Term Products for 2020." Accessed Jan. 20, 2021.
Life Happens and LIMRA. "2020 Insurance Barometer Study Reveals a Significant Decline in Life Insurance Ownership Over the Past Decade." Accessed Jan. 21, 2021.
Policygenius. "Policygenius Releases November Life Insurance Price Index." Accessed Jan. 21, 2021.
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