I’ve got some bad news and some good news, gleaned from the recent LIMRA Life Insurance Conference in New Orleans.
First the bad news, some of which I imagine you’ve heard before. The life insurance industry is selling almost 30 percent fewer individual life policies than it did in 1990, and the number of individual and group policies in force has declined from 389 million in 1990 to 291 million in 2009, according to the ACLI Life Insurers Fact Book. The number of insurance companies in the market has dropped precipitously — from 2,195 in 1990 to 946 in 2009.
Not done yet — here’s more: Back in 1984, 62 percent of Americans owned individual life insurance policies. In 2010, just 44 percent had individual coverage (Source: LIMRA 2010). As the total producer workforce has remained flat at 313,000, the number of independent producers declined from 163,409 in 2007 to 149,187 in 2010 (Source: LIMRA U.S. Producer Census).
Carolyn M. Johnson, executive vice president and chief operating officer at Protective Life and president of West Coast Life Insurance Company, covered all of these statistics while providing an executive outlook on the life insurance industry during the conference’s opening general session on April 16.
Now for the good news. Johnson hammered home that the bar is low right now for life insurance in America, but she wasn’t doing so just to be a “Debbie Downer.” She argued that the current state of the market means there is actually a great opportunity for the life insurance industry to connect with consumers, who as we all know are largely uninsured or underinsured.
At least consumers realize they need coverage, even if they haven’t yet been compelled to do anything about it. The 2013 Insurance Barometer Study from the LIFE Foundation and LIMRA revealed that 85 percent of consumers agree that most people need life insurance, and LIMRA’s 2010 Life Ownership Study found that 50 percent of adults admitted they need more life insurance — that’s 117 million prospects!
Consumer confidence in the life insurance industry is low, which, as Johnson pointed out, inherently means there is a lot of room for improvement. Service can improve. Complicated products and confusing terminology can be simplified. Studies show consumers don’t know how much life insurance coverage costs, but they think it’s more expensive than it really is. They don’t realize that the price of coverage on term products has actually come down substantially since the late 1980s. For example, back in 1987 a 45-year-old male, best class, would have paid $1,519 in annual premium for a 15-year term life policy with a $1 million death benefit. In 2011, the same coverage would only cost $894, or $74.50 per month.
Johnson emphasized that the industry needs to do a better job of packaging and communicating that affordability. I’ve said before that I love hearing ads on the radio or TV from life insurance quote aggregators or carriers that work to dispel the misperception that many people have about the cost of coverage. When consumers hear that “a 40-year-old male in excellent health can get a $500,000 10-year term life policy for $21 a month,” or “a 41-year-old female in excellent health can get a $350,000 10-year term life policy for under $16 a month,” it not only raises awareness about life insurance, it also shows that coverage might not cost as much as the consumer thought.
As life expectancies (and operating efficiencies) have increased, term life rates have decreased. Between 1994 and 1999, the Insurance Information Institute reported that premium rates for term life insurance saw an average annual drop of 15 percent. Between 2000 and 2007, rates dropped about 4 percent annually. While the rates aren’t declining so much in recent years, they aren’t rising, either. But the public generally doesn’t realize how much better a deal term life has become since the late 1980s.
Anyone else think this is a good story that has flown under the radar for too long?
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