THE LIFE/HEALTH INSURANCE INDUSTRY
Whether measured by premium income or by assets, traditional life insurance is no longer the primary business of many companies in the life/health insurance industry. Today, the emphasis has shifted to the underwriting of annuities. Annuities are contracts that accumulate funds and/or pay out a fixed or variable income stream. An income stream can be for a set period of time or over the lifetimes of the contract holder or his or her beneficiaries.
Nevertheless, traditional life insurance products such as universal life and term life for individuals as well as group life remain an important part of the business, as do disability income and health insurance.
Life insurers invest primarily in corporate bonds but also significantly in corporate equities. Besides annuities and life insurance products, life insurers may offer other types of financial services such as asset management.
LIFE INSURANCE OWNERSHIP
Sixty percent of all people in the United States were covered by some type of life insurance in 2015, according to LIMRA’s 2016 Insurance Barometer Study. Other findings from the study include:
- Thirty-four percent of Americans say they are likely to purchase a life insurance policy within the next year.
- Sixty-six percent of consumers say they are at least somewhat likely to recommend ownership of life insurance to others, an increase of 11 percentage points over last year. Nearly 9 in 10 consumers (86 percent) agree that most people need life insurance.
- Fifty-one percent of Millennials and 30 percent of people overall are very or extremely likely to consider wearing an activity tracker and share those results with a life insurance company in return for financial rewards for healthy behaviors; the number more than doubles (to 65 percent) when considering consumers who already use an activity tracker.
Investments, Life/Health Insurers, 2013-2015 (1)
2015 Financial Results
In 2015 the life insurance industry posted a 7.3 percent increase in net income after taxes despite continued low interest rates and soft equity markets that resulted in a $2.2 billion decrease in capital gains, according to S P Global Market Intelligence. Premiums were down 1.4 percent in 2015, compared with 2014, when premiums were at their highest level since the Great Recession. Expenses fell 4.5 percent in 2015 and net gains from operations before federal income tax rose 11.0 percent, after having fallen 22.1 percent in 2014. Capital and surplus rose to $367.4 billion in 2015 from $354.0 billion in 2014, according to S P Global Market Intelligence.
Life/Health Insurance Industry Income Statement, 2011-2015
PREMIUMS BY LINE
Measured by premiums written, annuities are the largest life/health product line, followed by accident and health, and life insurance. Life insurance policies can be sold on an individual, or ordinary. basis or to groups such as employees and associations. Accident and health insurance includes medical expense, disability income and long-term care. Other lines include credit life, which pays the balance of a loan if the borrower dies or becomes disabled, and industrial life, small policies whose premiums are generally collected by an agent on a weekly basis.
Direct Premiums Written By Line, Life/Health Insurance Industry, 2013-2015
(1) Includes brokers, stockbrokers and personal producing general agents.
(2) Includes career, multiline exclusive and home service agents.
(3) No producers are involved. Excludes direct marketing efforts involving agents.
(4) Includes financial institutions, worksite and other channels.
Source: LIMRA’s U.S. Individual Life Insurance Sales Survey and LIMRA estimates.
Although half of consumers prefer to purchase life insurance in person with a financial adviser or agent, the second most popular method was online, with 21 percent of respondents opting for that method, according to the 2016 Insurance Barometer Study survey by the Life and Health Insurance Foundation for Education (LIFE) and LIMRA. These proportions did not change from 2015’s survey. Ten percent or less respondents chose purchasing life insurance at their workplace, email, mail or over the phone. When asked why they prefer to purchase life insurance online, three-quarters of those consumers said the major reason was convenience and the ability to purchase at their own time and pace, according to LIMRA. Three out of five respondents cited the ability to research and the ease and speed of purchasing life insurance online as major reasons. Other reasons were the ability to comparison shop (58 percent or 3 out of 5 approximately) and lack of pressure to buy (55 percent) and comfort and confidence (45 percent). Nearly 30 percent of respondents have purchased or attempted to purchase life insurance through the internet, half within the past year. However, few actually completed their application online, and most were directed to meet with a financial advisor or agent. Half of online shoppers used a quoting engine website in 2016, compared with about 40 percent a year ago. This proportion rose to almost three-quarters for Millennials (ages 18 to 35). Eighty-eight percent of consumers say they would use the internet to research life insurance before purchasing coverage, about the same number as a year earlier. Ninety-five percent of Millennials would use the Internet to research life insurance. That amount falls for older age groups, down to 70 percent for consumers age 65 and older.