Whether measured by premium income or by assets, traditional life insurance is no longer the primary business of many companies in the life/health insurance industry. Today, the emphasis has shifted to the underwriting of annuities. Annuities are contracts that accumulate funds and/or pay out a fixed or variable income stream. An income stream can be for a set period of time or over the lifetimes of the contract holder and his or her beneficiaries.
Nevertheless, traditional life insurance products such as universal life and term life for individuals as well as group life remain an important part of the business, as do disability income and health insurance.
Life insurers invest primarily in corporate bonds but also significantly in corporate equities. Besides annuities and life insurance products, life insurers may offer other types of financial services such as asset management.
LIFE INSURANCE OWNERSHIP
Fifty-seven percent of all people in the United States were covered by some type of life insurance in 2014, according to LIMRA’s 2015 Insurance Barometer Study. Nearly one-third of Americans said they need more life insurance in 2015, as reported in the LIMRA study. Other findings from the 2015 report include:
- Fifty-four percent of Americans say they are unlikely to purchase a life insurance policy within the next year. Sixty-five percent said that they have not purchased more life insurance because they think it is too expensive, yet 80 percent of consumers misjudge the price of term life insurance.
- Millennials overestimate the cost by 213 percent and Gen Xers overestimate the cost by 119 percent.
- The most common financial worry among consumers over 25 years old is being able to afford a comfortable retirement. Consumers 25 and under are more concerned with paying monthly bills.
- Only 13 percent of Americans own long-term care insurance.
- Twenty-six percent of Americans own disability insurance.
2013 FINANCIAL RESULTS
While the life insurance industry continued to face challenges from a sluggish economy and low interest rates in 2013 for the second year in a row, operating results and capitalization improved as conditions in the stock market eased, according to a May 2014 report by A.M. Best. Capital, as measured by policyholders' surplus, rose to $331.9 billion in 2013 from $329.0 billion in 2012 according to SNL Financial. The industry’s net gain from operations before federal income taxes rose slightly to $63.7 billion in 2013 or 5.4 percent from $60.5 billion in 2012. Net income rose from $40.9 billion to $43.2 billion during the same period, the highest level in at least a dozen years according to SNL.
The life/health insurance industry’s cash and invested assets totaled $3.5 trillion in 2013, according to SNL Financial.
LIFE/HEALTH INSURANCE INDUSTRY INCOME STATEMENT, 2009-2013
($ billions, end of year)