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- Life Insurance
In 2020, 54 percent of all people in the United States were covered by some type of life insurance, according to LIMRA’s 2020 Insurance Barometer Study. Other findings from the study include:
Net income after taxes for the life/annuity insurance industry grew 18.1 percent in 2019 to $44.7 billion from $37.8 billion in 2018, according to S&P Global Market Intelligence. Net income before capital gains grew 21.1 percent in 2019 from 2018, but a net realized capital gains loss of $6.9 billion reduced the net income level to $44.7 billion. Premiums and annuity considerations rose 12.7 percent in 2019, following weak growth in 2018, reflecting the 26.8 rise in annuity premiums and deposits, as life insurance premiums were flat. Expenses grew slightly in 2019, up 0.4 percent, following a 10.6 percent increase in 2018. Capital and surplus rose to $422.2 billion in 2019, up 5.5 percent from $400.1 billion in 2018, according to S&P Global Market Intelligence.
Traditional life insurance is no longer the primary business of many companies in the life insurance industry. The emphasis has shifted to the underwriting of annuities, which accounted for 48 percent of life/annuity direct premiums written in 2018. Annuities are contracts that accumulate funds or pay out a fixed or variable income stream. An income stream can be for a set time period or over the lifetimes of the contract holder or beneficiaries. Accident and health insurance, which includes distinctive products apart from traditional health insurance, accounts for 27 percent of direct premiums written. Traditional life insurance products such as universal life and term life for individuals, and group life, remain an important part of the business, making up the remaining 25 percent of direct premiums written. In addition to annuities, accident and health, and life insurance products, life insurers may offer other types of financial services such as asset management.
Traditional health insurance, which is not included in this section and are not considered a part of the life/annuity sector, are described under Private Health Insurance. Health insurance pays for medical, surgical and hospital services received by the insured, as well as routine and preventive care, usually within a network format. Of the many types of plans available, most include a deductible paid by the insured, and benefits received are tax-free. Accident insurance and health insurance, which is included in the life/annuity and property/casualty (P/C) sectors, encompass a variety of specialty products related to health, such as reimbursement for the time a policyholder spent in a hospital or was disabled; short- and long-term disability based on employment; long-term care, and critical or catastrophic illness insurance. Accident and health insurance are not meant to replace health insurance.
($ billions, end of year)
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(1) Calculated from unrounded data.
(2) Less than 0.1 percent.
(3) Data not available.
NA=Not applicable.
Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
Annuities are the largest life product line as measured by direct premiums written and accounted for 48 percent of direct premiums written by life insurers in 2019. Accident and health insurance accounted for 27 percent of direct premiums written. Accident and health insurance, not to be confused with traditional health insurance, includes reimbursement for certain medical expenses. These include: short- and long-term disability; critical or catastrophic illness insurance; and long-term care. Life insurance accounted for the remaining 25 percent of direct premiums written. Life insurance policies can be sold on an individual, or ordinary, basis or to groups such as employees and associations. Other lines include credit life, which pays the balance of a loan if the borrower dies or becomes disabled; and industrial life, small policies whose premiums are generally collected by an agent on a weekly basis.
($000)
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(1) Before reinsurance transactions.
(2) Excludes accident and health premiums reported on the property/casualty and health annual statements.
(3) Less than 0.1 percent.
(4) Excludes deposit-type funds.
Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
Credit life insurance, a form of decreasing term insurance, protects creditors such as banks. The borrower pays the premium, generally as part of the credit transaction, to cover the outstanding loan in the event he or she dies. The face value of a policy decreases as the loan is paid off until both equal zero. When loans are paid off early, premiums for the remaining term are returned to the policyholder. Credit accident and health, a similar product, provides a monthly income in the event the borrower becomes disabled.
($000)
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Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
Life/annuity and P/C insurers are key players in capital markets, with $9.0 trillion in cash and invested assets in 2019, according to S&P Global Market Intelligence. Life insurance and annuity cash and invested assets totaled $4.3 trillion in 2019, and separate accounts assets and other investments totaled $2.8 trillion. P/C insurer cash and invested assets were $1.9 trillion in 2019.
Because life insurance products are long-term, generally in force for 10 years or longer, payments are predictable. Therefore, life/annuity insurers invest primarily in long-term products. In 2019 life insurers, excluding separate accounts, invested 71 percent of their assets in bonds and 2 percent in corporate stocks. Life insurers invested 13 percent of their assets in mortgage loans on real estate that take seven years or longer to mature.
($ billions, end of year)
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(1) Data are net admitted assets of life/annuity insurers.
Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
($000)
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(1) Includes life insurance, annuity considerations, deposit-type contract funds and other considerations, and accident and health insurance. Before reinsurance transactions.
(2) Based on U.S. total, includes territories.
Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
($000)
|
(1) Before reinsurance transactions. Based on U.S. total, includes territories. Excludes annuities, accident and health, deposit-type contract funds and other considerations.
Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
($000)
|
(1) Before reinsurance transactions. Based on U.S. total, includes territories. Excludes annuities, accident and health, deposit-type contract funds and other considerations.
Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
Life insurance was once sold primarily by career life agents, captive agents that represent a single insurance company, and by independent agents, who represent several insurers. Now, life insurance is also sold directly to the public by mail, telephone and through the Internet. In addition, in the 1980s insurers began to market annuities and term life insurance through banks and financial advisors, professional groups and the workplace. A large portion of variable annuities, and a small portion of fixed annuities, are sold by stockbrokers.
From 2010 to 2019 independent insurance agents’ share of the individual life insurance market grew to 53 percent from 48 percent. The direct response channel also grew, from 4 percent to 6 percent. Affiliated agents have lost some ground, falling from 41 percent to 36 percent, as shown in the chart below.
(1) Includes brokers, broker-dealers, personal producing general agents and registered investment advisers.
(2) Includes agency building, multiline exclusive and home service agents.
(3) No producers are involved. Excludes direct marketing efforts involving agents. Includes internet sales where consumers submit online applications.
(4) Includes financial institutions, worksite and other channels.
Source: U.S. Individual Life Insurance Sales Trends, Industry Estimates, 1975-2019, LIMRA, 2020.
Almost half of consumers of all ages (45 percent) would go online to find more information on life insurance, but would complete the purchase with an agent or financial advisor, according to the 2018 Insurance Barometer Study survey by the Life and Health Insurance Foundation for Education (LIFE) and LIMRA. Over half of Millennials would research life insurance online, but they would purchase life insurance from a financial professional. Gen-Xers are the group most likely (32 percent) to research and complete the purchase entirely online.
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Separate accounts are funds held by life insurance companies that are maintained separately from the insurer’s general assets. They were originally established in response to federal securities laws concerning investment-linked variable annuities, according to the National Association of Insurance Commissioners. Variable annuities operate like mutual funds because their earnings vary as they invest in many different vehicles. Separate accounts have evolved rapidly in the past 20 years and now support an array of hybrid investment products.
Separate accounts contribute to the revenue of life/annuity insurers. (See Life/Annuity Insurance Income Statement, 2015-2019, above). In 2019 separate accounts contributed $36.8 billion to the total amount of life/annuity insurance revenue of $922.3 billion.