The life insurance coverage gap: a multi-trillion dollar chasm

The study emphasizes that the life insurance coverage gap is “most acute” for those in the middle market. Americans in this income bracket represent more than 30 percent of the in-force face value of current individual life insurance.

On a more positive note, the report observes that more Americans are taking responsibility for building a retirement nest egg. The trend is availing insurers of more opportunities to sell products offering guaranteed income streams.

The potential market is large and growing: Conning pegs defined contribution plan and individual retirement accounts assets that could be converted to annuities at $11 trillion, and adds to this total $5 trillion in non-qualified mutual fund assets.

The study also highlights these findings:

• The 3^rd income quintile ($40,000-$65,500 in household income), present a less attractive opportunity for life insurers, as Americans occupying this income category are financially strained and may find increased life insurance purchases difficult.

• The 4^th income quintile ($65,500-$106,000 in household income) is “far more attractive,” with more flexibility and greater absolute opportunity.

• For both income quintiles, retirement security is ranked higher in importance than protecting against an untimely death.

• Opportunities still exist for the high net worth/high income market, as life insurance ownership in face amount has decreased from pre-financial crisis levels.

• Retirement income is a higher priority for Americans than pure death protection products, so the opportunity for savings products is greater for insurers. The top income quintiles spend 15 times more on retirement savings than on life insurance.

• Baby boomers still have a need for life insurance products, with combination Life-LTC (long-term care) products being a large opportunity for insurers.

• Retirement income sales to baby boomers may be skewed to later years because older baby boomers are more likely to have defined benefit (DB) plans and younger boomers are more likely to have defined contribution (DC) plans.