Life insurance's global boom

Opportunities for U.S. sales also will increase as more carriers and insurance agents offer “pure online options,” more employers place life insurance products on their menu of voluntary benefits, and if the new health care exchanges offer such products, he says.

Markets to watch

While the U.S. middle market may represent the largest opportunity, U.S. “ethnic” markets, particularly the Hispanic market, is increasingly being recognized as a great potential for life insurance sales, Silverhart says. Between 2000 and 2010, the U.S. population increased by 27 million, and the Hispanic population represented more than half of the total growth, increasing by 15 million.

“Over the next 20 years, Hispanics will grow by 36 million—three and a half times more than any other ethnic group,” Silverhart says. “While the numbers suggest a huge opportunity, only those who understand and respect the cultural sensibilities of Hispanic market, as well as other ethnic markets, will have an opportunity to succeed.”

Indeed, all of New York Life’s U.S. cultural markets are experiencing growth in life insurance sales, and the fastest-growing is the Hispanic market, says Jane Conti, vice president, agency department, New York Life. The carrier does not sell life insurance in foreign countries.

“The Hispanic market is experiencing significant growth due to the size of the population and its mounting affluence and influence in the United States,” Conti says. “Business owners make up a large portion of these cultural markets and life insurance can be used to protect businesses and ensure they can be passed from generation to generation, which is often a critical objective.”

In some U.S. cultural markets, like many of the U.S. Asian markets, whole life insurance is attractive based on its ability to provide cash value which from their perspective aligns with their desire to be conservative, protect their families and businesses and save for the future, she says. In these markets, personal savings rates tend to be higher than mainstream.

In its first quarter (fiscal year ending Sept. 30), New York Life’s individual recurring premium life insurance sales through agents rose 20 percent, over the first quarter of 2012. The number of life insurance policies sold through agents rose 6 percent, with 45 percent of the company’s new life insurance policies produced by agents serving the cultural markets. New York Life’s cultural markets include African-American, Chinese, Hispanic, Korean, South Asian and Vietnamese.

In the future, Gen Yers present an emerging opportunity, as the US Census Bureau projects that they will make up 65 percent of the American workforce within the next five years, Conti says.

“Generation Y is also a tremendous opportunity in the various cultural markets where there is a growing number of individuals from these backgrounds who either came here when they were very young, and a number who were born in the United States,” Conti says.

“These individuals still retain many of their cultural traditions, but have also adopted many Western traditions,” she says. “Their world is very diverse, and the way we connect with them may be slightly different than their first generation parents.”

What women want

Another market opportunity is the “women’s market,” considering that 60 percent of the country’s wealth is now controlled by women, Conti says.

“There is tremendous opportunity to educate individuals on the importance of life insurance as a part of their financial plan and the real needs that they have when they look holistically at their family’s and/or business needs,” she says.

Prudential’s U.S. individual life and group insurance division reported a $69 million increase in earnings in the second quarter, as new business premiums doubled over the prior year, Trefis’ analysts said. The increase was largely due to increased distribution capabilities from last year’s acquisition of The Hartford Financial Services Group’s individual life insurance business, which contributed $58 million to second quarter sales.

Individual life premiums for the second quarter of 2013 were up 11 percent from the prior year.

Gail Van Dalen, chief marketing officer, Prudential’s individual life insurance, says that, while industry-wide sales of individual life insurance policies have slowed in the U.S., sales of Prudential’s products are “strong and are well ahead of the industry average.”

“Our growth in the United States is due primarily to four factors — a broad portfolio of products, a highly skilled and knowledgeable sales force, competitively-priced products, and the reputation of the rock-solid Prudential brand,” Van Dalen says.

Across the industry, life insurers are creating products that can better help address consumers’ needs, she says. For example, policies with accelerated benefit riders can help cover the cost of care related to a chronic illness.

“Sales of hybrid policies industry-wide were up by double digits last year; however, the average consumer doesn’t even know they exist,” Van Dalen says. “Today, no one company sells more than a few thousand policies a year with a long-term care or chronic-care rider, yet there are millions of boomers looking for new solutions to help them cover the cost of becoming chronically or terminally ill.”

Prudential also focuses on niche markets, with “signature diversity research” on the financial experiences of women, African Americans, Hispanics, and lesbian, gay, bisexual and transgender individuals and couples.

“Prudential’s research into diverse, multicultural markets is helping us better understand how to reach and appeal to consumers who have been underserved by the industry in the past,” she says.

Jim Gemus, senior vice president of Prudential’s group life and voluntary benefits, says that escalating health care costs are forcing employers to ask their employees to share more of the health care costs and provide other benefits, such as life insurance, on a voluntary basis.

To find out what the carrier could do to help people select appropriate insurance coverage, Prudential partnered with Boston College’s Center for Retirement Research in 2012 research showed that people understand the importance of life insurance, but have a tough time understanding how much insurance they need.

Working with experts in behavioral economics, Prudential developed strategies to help people better calculate their insurance requirements, Gemus says. For example, during the benefit selection process, coverage levels increased when participants were presented a checklist as to what expenses they should keep in mind when selecting the type of coverage. Personalized estimates and showing the life insurance payout in terms of annual payments for a few years had similar effects on coverage.

“These are some examples of the steps we are taking at Prudential Group Insurance to continue to drive leadership in this space,” he says. “We are focused on developing market leading products and providing assistance to employers and employees to raise awareness about the value of life insurance and where it fits into a financial plan and holistic benefit strategy.”

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