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U.S. life insurance activity: down in FY 2014, up in Q4 2014

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Application activity for individually underwritten life insurance dipped 0.6 percent between 2013 and 2014, but year-over-year activity in the fourth quarter was up 2.6 percent, according to new research.

MIB Group Inc. unveils these results in the latest release of its MIB Life Index. The monthly benchmark of U.S. application activity is based on the number of searches MIB life member company underwriters perform on the MIB Checking Service database.  

The report shows that first quarter declines of -5.4 percent (Q1 2014 vs. Q1 2013) moderated over the second and third quarter, with the fourth quarter showing the most significant growth at +2.6 percent (Q4 2014 vs. Q4 2013). November and December 2014 showed the sharpest increases: up +5.2 percent and +2.6 percent, respectively.

November’s activity was unusually strong, up +10.6 percent compared to October; December’s activity declined -8.3 percent as compared to November, the largest decrease on record for this time period.

“The improvement in U.S. application activity in the last three quarters of 2014 was encouraging,” says MIB Life Index CEO Lee Oliphant. “I don’t know if three quarters makes a trend, but we’re heartened by the direction of [U.S. application activity].

“I believe the industry is making inroads in reaching the vast underserved middle market,” he adds. “Barring a shock to the economy, I’m cautiously optimistic that we’ll continue to see industry growth.”

Oliphant attributes the recent uptick in U.S. in policy issues to growing success among carriers in marketing and selling to the millennials and gen X generations; and to the adoption of technologies — self-service web portals, streamlined underwriting,  mobile-friendly software, among other solutions — that enable insurers to more efficiently serve clients and prospects.

At year-end 2014, the U.S. life insurance industry was -2.4 percent below its previous low in 2010, as measured by the MIB Life Index. The MIB Life Index age groups showed a mixed, yet improved picture from year-end 2013. In 2014:

  • ages 0-44 were off -1.5 percent year-to-date (YTD)

  • ages 45-59 were off -0.8 percent YTD; and

  • ages 60+ were up +2.8 percent YTD.

The largest monthly decline in the 2014 MIB Life Index occurred in January (composite off -7.9%; 0-44, -9.1%; 45-59, -8.7%; 60+, -2.9%) with all age groups gradually improving over subsequent months.

November and December showed the largest increases across all ages, with ages 60+ in positive territory for the last nine consecutive months. And 2014 marks the 60+ age group’s return to positive territory after losing ground in 2013, off -1.2 percent YTD, levels not seen since mid-2007.

The recent gains in application activity aside, Oliphant sounded a cautious note about the industry’s long-term prospects. The reason: erosion in application over the past decade and half. Since 2001, when the MIB Life Composite Index measured 100, the industry benchmark has dipped to 79.

“There is a strong correlation between application activity and the number of policies issued,” says Oliphant. “Over the same period, life insurance in-force or the aggregate face amount has grown, but the number of policies issued and application activity has shrunk considerably. Hopefully, the downward long-term trend [of the latter] will stabilize.”

The table and figure on the following page show the year-over-year percent changes in the MIB Life Index since 2001.