Facts + Statistics: Life insurance

 

The life/annuity insurance industry

Whether measured by premium income or by assets, 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, a sector of the life business that accounts for 46 percent of direct premiums written. Annuities are contracts that accumulate funds and/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 his or her beneficiaries. Accident and health insurance, which include distinctive products that should not be confused with traditional health insurance, account for 28 percent of direct premiums written. 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, accounting for the remaining 27 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, whose premiums and other activities are 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. There are many types of plans available and most include a deductible paid for by the insured, and benefits received are tax-free. Accident and health insurance, which is included in the life sector, encompasses a variety of specialty products related to health, such as those that reimburse insureds for the time they spend in a hospital or are disabled, long-term care, short- and long-term disability, and critical or catastrophic illness insurance. Accident and health insurance are not meant to replace health insurance.

 

Life insurance ownership

About sixty percent of all people in the United States were covered by some type of life insurance in 2018, according to LIMRA’s 2018 Insurance Barometer Study. Other findings from the study include:

• Among those with life insurance, about 1 in 5 say that they do not have enough.
• Half of all adults visited a life company website and/or sought life insurance information online in 2018. Almost 1 in 3 purchased or attempted to purchase life insurance online — about the same as in 2017.
• Consumers overestimate the cost of life insurance, especially younger generations; 44 percent of Millennials overestimate the cost at five times the actual amount.
• Half of all consumers say they are more likely to purchase life insurance if priced without a physical examination.

 

2018 financial results

According to S&P Global Market Intelligence, in 2018 net income after taxes for the life/annuity insurance industry fell 10.0 percent to $37.9 billion, from $42.1 billion in 2017. Net income before capital gains fell 15.8 percent in 2018, and a net realized capital gains loss of $4.7 billion contributed to lower net income. Premiums and annuity considerations rose slightly in 2018, up 1.3 percent from 2017, as annuity premiums and deposits fell 6.1 percent. Expenses grew by 10.8 percent in 2018 following a drop in 2017. Capital and surplus rose to $400.0 billion in 2018 from $394.9 billion in 2017, according to S&P Global Market Intelligence.

 

Premiums by line

Measured by premiums written, annuities are the largest life/health product line, followed by accident and health, and life insurance. Life insurance policies can be sold on an individual, or ordinary, basis or to groups such as employees and associations. Accident and health insurance includes medical expense, disability income and long-term care. 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.

 

Credit life insurance

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.

 

Distribution channels

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.

Independent insurance agents have held over half of the individual life insurance market over the 10 years from 2009 to 2018, but have lost some ground to affiliated agents and direct response companies, as shown in the charts below.

 

Life Individual Market Share by Distribution Channel, 2009 and 2018

 

life_ind_mark_share_by_distr_chan_09-18.gif

(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, 1975-2018, LIMRA, 2019.

View Archived Graphs

 

Online sales

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.

WORKSITE LIFE INSURANCE SALES BY LINE OF BUSINESS, 2014 work_life_ins_sale_by_lin_of_bus_14.gif (1) Short-term and long-term disability. Source: Eastbridge Consulting Group, Inc. View Archived Graphs

Worksite marketing is the selling of voluntary (employee-paid) insurance and financial products at the worksite. The products may be on either an individual or group platform and are usually paid through periodic payroll deductions. Worksite sales of life and health insurance totaled $6.89 billion in 2014, up about 3.7 percent from 2013.