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 2019. 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 is not considered a part of the life/annuity sector, is 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 and health insurance, which is included in the life/annuity and property/casualty (P/C) sectors, encompasses 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 is not meant to replace health insurance.
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 $400.1 billion in 2018, according to S&P Global Market Intelligence.
($ billions, end of year)
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.