Americans went on a buying spree for life insurance in 2021, driven by death concerns from the continuing pandemic coronavirus.
Premium volume for new individual life-insurance policies surged 20% compared to 2020, while the number of policies issued rose 5%, the biggest year-over-year percentage gains since the 1980s, according to industry-funded research firm Limra.
“As we zero in on one million Americans who tragically lost their lives, it’s no surprise that people are thinking about their own mortality and the impact on loved ones if anything were to happen to them,” said David Levenson, Limra’s chief executive.
The exact number of policies sold is still being calculated, but it is expected to top 10 million, Limra said. That milestone was last crossed in 2016. In 2020, an estimated 9.83 million policies were sold, up 1.7% from 2019.
The growth in 2021 in annual premiums collected from new sales outpaced growth in the number of policies sold in part because the average size of policies increased. Limra said inflation wasn’t a factor in the higher revenue figure.
The 2021 sales increases follow decades of declining and sluggish activity across the US life-insurance industry. For many years Americans have been more concerned about outliving their savings than dying prematurely, according to surveys and industry executives. Buying individual-life policies fell in priority as they contributed to 401 (k) s and other savings vehicles, and many insurers ramped up sales of annuities and mutual funds as a result.
Many people in recent decades have relied on life insurance provided by their employers, which became a more common workplace benefit as of the 1980s. As the pandemic hurts the economy, sales of individual policies got a lift partly because people either lost their employer-sponsored life insurance or feared losing it, insurers and agents said.
In 2020, insurers and agents were still grappling with how to sell and underwrite policies amid Covid-19 stay-at-home directives and other disruptions. And some insurers suspended or quit sales of certain types of policiesmoves tied to declines in US interest rates and resulting pressure on those products’ profitability.
Last year’s sales growth reflected the expansion of online and other direct-to-consumer options that allowed insurers to better reach people of lesser means. Sales of policies under $ 100,000 grew the fastest in 2021, up 7%, including many modest-sized policies aimed at covering people’s funeral expenses and other bills, Limra said.
“As a result of the pandemic, there is greater consumer demand for life insurance to cover burial and final expenses,” Mr. Levenson said.
At the same time, the industry added back some of the higher-income, more-complicated and bigger sales that were lost when shutdowns and fear of Covid limited insurers’ ability to collect blood and urine samples, amid other challenges.
Whole-life insurance was a popular choice in 2021. This type of policy combines a death benefit with a savings component, and is designed to be in place until the insured person dies. It does this by allowing tax-deferred savings to build up to be used to help offset the rising cost of insurance as the person ages. The average face value of a whole-life policy jumped 12% to $ 76,211, Limra said.
Face value of the average term-life policy edged up 2% to $ 498,871. Term life is a basic type of coverage, paying out if death occurs during a specified number of years. The policies are popular with young families who want to be able to pay the mortgage and tuition bills should a breadwinner die.
“People saw healthy individuals who were on their feet one day within a matter of days requiring hospitalization and ventilators, ”said Steven Crabbe, an agent for New York Life Insurance Co. in White Plains, NY Many of his new customers opted for term life in 2020 as a stopgap measure, he said.
“We got them covered so they had peace of mind,” he said, adding that the improving economy made customers more comfortable committing to longer-term products in 2021.
Since the pandemic’s early days, many insurers have relaxed requirements for blood and urine samples to size up applicants’ health. Some stepped up use of increasingly digitized medical records. A growing number automated their underwriting programs and now have online platforms.
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