Americans went on a life insurance buying spree in 2021, fueled by fears of death from the ongoing coronavirus pandemic.
According to industry-funded research firm Limra, premium volume for new individual life-insurance policies increased by 20% compared to 2020, while the number of policies issued increased by 5%, the largest year-over-year percentage gains since the 1980s.
“As we focus on the one million Americans who tragically died, it’s not surprising that people are thinking about their own mortality and the impact on loved ones if something were to happen to them,” said Limra CEO David Levenson.
The exact number of policies sold is still being calculated, but Limra expects it to exceed 10 million. That mark was last reached in 2016. In 2020, an estimated 9.83 million policies will be sold, representing a 1.7 percent increase over 2019.
The increase in annual premiums collected from new sales in 2021 outpaced the increase in the number of policies sold, owing in part to an increase in the average size of policies. According to Limra, inflation was not a factor in the higher revenue figure.
The 2021 sales increases come after decades of declining and sluggish activity in the life-insurance industry in the United States. According to surveys and industry executives, Americans have been more concerned about outliving their savings than dying prematurely for many years. Individual-life policies became less important as people contributed to 401(k)s and other savings vehicles, and many insurers increased sales of annuities and mutual funds as a result.
Many people have relied on life insurance provided by their employers in recent decades, which became a more common workplace benefit in the 1980s. As the pandemic harmed the economy, insurers and agents said that sales of individual policies increased partly because people either lost or feared losing their employer-sponsored life insurance.
In 2020, insurers and agents were still figuring out how to sell and underwrite policies in the face of Covid-19 stay-at-home directives and other changes. In addition, some insurers have suspended or discontinued sales of certain types of policies, in response to a drop in US interest rates, which has put pressure on the profitability of those products.
Last year’s sales increase reflected the expansion of online and other direct-to-consumer options, which allowed insurers to reach out to people with lower incomes. According to Limra, 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.
“As a result of the pandemic, there is more consumer demand for life insurance to cover burial and final expenses,” Mr. Levenson explained.
Simultaneously, the industry regained some of the higher-income, more-complicated, and larger sales that had been lost due to shutdowns and insurers’ inability to collect blood and urine samples, among other challenges.
In 2021, whole-life insurance was a popular option. This policy combines a death benefit with a savings component and is intended to remain in effect until the insured person dies. It accomplishes this by allowing tax-deferred savings to accumulate, which can then be used to help offset the rising cost of insurance as the person ages. According to Limra, the average face value of a whole-life policy has increased by 12% to $76,211.
The average term-life policy face value increased by 2% to $498,871. Term life insurance is the most basic type of coverage, paying out if you die within a certain number of years. These policies are popular among young families who want to be able to pay their mortgage and tuition if a breadwinner dies.
“People saw healthy individuals who were on their feet one day and required hospitalization and ventilators within a matter of days,” said Steven Crabbe, an agent for New York Life Insurance Co. in White Plains, N.Y. Many of his new customers chose term life insurance in 2020 as a stopgap measure, he said.
“We got them covered so they could have peace of mind,” he said, adding that the improving economy made customers more willing to commit to longer-term products in 2021.
Since the beginning of the pandemic, many insurers have relaxed their requirements for blood and urine samples to assess applicants’ health. Some people increased their use of increasingly digitized medical records. A growing number of underwriting programs have been automated, and online platforms are now available.