The Pandemic Boosted Life Insurance Sales, But for How Long?
Life insurers may have to act fast to hold consumers’ attention.
MIB’s Life Index shows U.S. applications rose by 4% in 2020, the biggest full-year increase in the last decade, bolstered by a 14.1% spike in July and a 7.6% jump in October. This growth trend has continued into 2021, according to MIB, with applications up overall by 10.1% for the first quarter and 18.5% in March over the same month in 2020, when the pandemic first hit the U.S. market.
In the best of times, however, life insurance can be a hard sell. Unlike auto insurance, which is usually required by law, individual life insurance is a discretionary product. That means it’s an easy purchase for most people to put off — sometimes permanently. It may be even harder to sell supplemental life insurance to millions of individual buyers who already have simple term coverage through their employee benefit plan.
Yet individual life insurance should be a critical component of most financial security plans, as many potential buyers appeared to realize during the COVID-19 outbreak. Indeed, Deloitte’s research indicates that the pandemic did make consideration of a life insurance purchase front of mind for many individuals, who were likely concerned about the possibility of contracting and perhaps not surviving a COVID-19 infection.
Survey Data
The pandemic even spurred an increase in life insurance interest among many current policyholders who said they didn’t feel they have as much coverage as they might need, according to a recent U.S. consumer survey by the Deloitte Center for Financial Services. For example, our study revealed that 40% of respondents who had purchased a policy but felt underinsured said they were considering increasing their coverage because of the pandemic.
Deloitte’s survey results also indicated that younger respondents appeared more interested in increasing mortality coverage due to concerns prompted by COVID-19, while appeal generally waned as age increased. This could be because younger people are more likely to have children to be concerned about, as well as higher amounts of outstanding mortgage or student debt to cover. Moreover, younger workers experienced higher unemployment rates throughout the pandemic compared to older workers, so they may have purchased individual coverage to make up for the loss of employer-sponsored group policies.
However, as mentioned earlier, it can be difficult to sell life insurance, even in the wake of a deadly pandemic. Only 14% of lapsed buyers surveyed by Deloitte (those who once had policies that have since been terminated), as well as only 20% of those who never had mortality coverage, said they were interested in buying life insurance, despite COVID-19 concerns.
While life insurers and agents selling individual policies should find greater interest among many potential first-time buyers as well as those looking to upgrade their current coverage as long as concern over COVID-19 exposure persists, the pandemic is unlikely to remain a relevant selling point for long. A survey by NerdWallet showed the fleeting nature of COVID-19 concerns, as about one-third of those who considered purchasing life insurance due to the pandemic—but ultimately didn’t—said they decided against buying because cases in their area started to drop. Meanwhile, a growing percentage of the U.S. population is being vaccinated and more people are starting to return to pre-pandemic routines both in and outside of work.
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These trends make it clear that to achieve sustained growth, insurers should be taking steps to address more fundamental, long-term challenges in selling individual life policies. Persistent disinterest in buying coverage among significant segments of the population — even during a pandemic —indicate that insurers should be developing different approaches to attract hard-to-penetrate customer segments.
As insurers shift from responding to the pandemic back to a longer-term growth mentality, the estimated $12 trillion U.S. life insurance gap identified by LIMRA still looms large. To close this gap, insurers should be considering innovations to enhance life insurance education and advice, product design, customer acquisition and retention strategies, as well as customer experience. Carriers and their intermediaries have a huge opportunity to both generate growth as well as enhance their corporate social responsibility goals.
On the latter point, earlier this year the Deloitte Center for Financial Services published, “Driving purpose and profit through financial inclusion: Stronger together,” calling on financial institutions to find ways of providing greater access to important and affordable financial products and services. Life insurance is one such product. Not only can individually owned policies help finance retirement, but its death benefits can be all that stands in the way of a family losing their home because they can’t pay the mortgage or suffer other dire financial consequences should a member be lost — especially in the prime of their working lives.
Fear fueled by the global pandemic catalyzed more widespread consumer interest in and awareness of mortality products. Meanwhile, the pandemic also illustrated the truth behind the proverb, “Necessity is the mother of invention.” Over the past year, many insurers and agents rapidly advanced their digitization and virtualization efforts, enabling them to pivot to effectively address client needs and streamline the sales and underwriting process without face to face contact, or expensive and often uncomfortable medical tests.
But it also demonstrated how agile and adaptive the industry can be when the chips are down. Insurers should build on that momentum to adapt their products, sales, and service approaches for a post-pandemic world. We’ll explore some potential avenues for longer-term transformation in a subsequent report later this year based on our consumer survey and analysis.
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