Declining ownership of life insurance in middle-income America often is attributed in part to the belief that agents are neglecting this market to pursue wealthier households. Part of the customary prescription for solving this challenge is to direct agents toward middle-income markets, in the belief that the high-net-worth market already is saturated when it comes to life insurance.

However, our research shows that the high-net-worth market is still significantly underpenetrated–a fact that has changed very little over the past seven years during which the Phoenix Wealth Survey has studied the financial attitudes, behavior and product ownership of the high-net-worth market. One of the things the survey tracks is life insurance ownership trends in the high-net-worth market. From this research we can say with confidence the belief that the HNW market is saturated when it comes to life insurance ownership is a myth.

As shown in Table 1, more than half of high-net-worth households (defined as $1 million or more in net worth, not including primary residence) do not own any permanent life or term insurance product. These numbers have not changed significantly over the years.

Given the relevance of estate planning to this target market, we also spike out second-to-die life insurance in our tracking. Here we find that less than 10% of the HNW own this product. Again, this number has changed little over the course of our research–although we do find evidence that hesitancy to purchase this product has increased in recent years due to the debate surrounding the future of estate taxes.

By their own admission, a full 12% of those who own individual life insurance do not have enough life insurance for their needs. This number is likely an underestimate, as 26% of these high-net-worth millionaires indicate they have less than $100,000 of individual life insurance, and more than half (55%) report having less than $500,000 of individual life insurance coverage.

Also shown in Table 1 is the percentage of high-net-worth households who say they plan to purchase each of these products within the next three years. These numbers also have not changed over the years of our annual survey. And, while these percentages may seem low, it must be remembered that each percentage point translates into some 89,000 high-net-worth households when projected against the total number of households in this target market.

A generational analysis

Today, it is nearly impossible to avoid seeing articles in the industry and business press regarding the baby boomer generation. However, most treat this vast segment as an undifferentiated mass. In this year’s survey, we conducted a detailed analysis of high-net-worth baby boomers. To better understand the dynamics of this market, we broke the boomers down into both “Leading” and “Trailing edge” generations and also analyzed them against the high-net-worth generations that both preceded and followed them.

The high-net-worth groups we compared were:

o The “Silent Generation” (born 1945 or earlier);

o “Leading Edge” boomers (born between 1946 and 1954);

o “Trailing Edge” boomers (born between 1955 and 1964); and

o “Gen-Xers” (born 1965 or later).

Life insurance ownership among these groups is shown in Table 2.

While 44% of all high-net-worth households own permanent life insurance, ownership is significantly greater in the Silent Generation (51%) and significantly lower among the Gen-Xers (33%). Baby boomers, and especially Trailing Edge boomers, are the most likely to own term, while term was least likely to be owned among members of the Silent Generation (30%). There were no differences among the generations in terms of second-to-die ownership.

While the results for the Gen-X high-net-worth millionaires might be seen as disappointing, it should also be pointed out that this generation has the highest percentage of non-married households. Thus, it’s also important to look at future purchase intentions among these four generations for these products.

Table 3 shows that the Gen-X HNW plan to increase their coverage in the next several years. However, it also appears they are most likely to purchase term. Unfortunately, it is impossible to determine from this data whether the higher-than-average future purchase intentions among Gen-Xers signal a generation that is more favorable toward life insurance than preceding generations, or whether they are simply a function of Gen-Xers’ current life stage. Regardless of the reason, it is clear that there is a current opportunity for life insurance sales among the youngest high-net-worth households.

In the second of this series, we will explore other differences found in our examination of high-net-worth baby boomers and Gen-Xers.