New annualized life insurance premiums up 20% in 2021

Total life insurance new annualized premiums by dollar amount soared by 20% in 2021, the highest annual growth recorded since 1983, in part spurred by pandemic awareness and concerns, according to an industry group that tracks sales. Overall, policy sales rose 5%, the highest annual growth since 1983, pushed up by strong tailwind of 26% premium growth in the fourth quarter.

The pandemic spurred greater purchases of life insurance products

LIMRA, the life insurance research organization based in Connecticut, found that the COVID-19 pandemic raised consumer awareness and demand for life insurance protection in its recent fourth-quarter U.S. survey released March 16.

“Three in 10 Americans tell us they are more likely to purchase coverage due to COVID-19,” David Levenson, president and CEO, of LIMRA and LL Global, the parent organization, explained.

Largest carriers boasting growth almost across the board

LIMRA also reports that almost two-thirds of life insurers reported sizeable positive gains, which was more concentrated at the top ranks of companies, with nine of the top 10 carriers showing surges in growth.

The product lines seeing the highest growth included whole life and variable life insurance, according to LIMRA.

Variable universal life premiums skyrocketed by 65% in the fourth quarter, with protection-focused products up 33% and accumulation-focused variable universal products more than doubling, according to the data. 

The variable universal life market share was 12% in 2021, behind the larger segment of whole life, but its market share now at the highest it has been since 2008, LIMRA stated.

Whole life products poised to be popular in 2022, 2023

New annualized premiums for traditional or whole life insurance, which charted its strongest quarterly growth in 30 years, climbed 27% in the fourth quarter and 20% in 2021 over 2020 premium levels. 

LIMRA says that whole life, which constitutes more than a third of the individual retail life insurance in 2021, is poised to be popular in 2022 as the year rolls on. LIMRA is predicting that whole life sales will grow about 10% this year and continue to steam along in 2023 with increasing sales. 

Half of those insurers which underwrite whole life policies recorded double-digit increases, as did 80% of the top 10 carriers. 

More 2021 winners — and one product that lagged in the 4th quarter

Another big winner was indexed universal life, which comprises about 25% of all individual life insurance premiums for 2021. This product, which has a cash value account linked to a stock market index along with a death benefit, enjoyed 29% growth in new premium in the fourth quartered 21% year-over-year.

Premiums for all fixed universal life product types, which make up 8% of the total premium market, grew by 10% in 2021, according to LIMRA.

Term life was the only category of life products that did not experience sales growth in the fourth quarter, falling 1%. However, new term premiums were up 5% for the year and LIMRA expects this growth to continue apace based on ongoing interest from consumers and online marketing efforts. 

LIMRA notes that its survey covers 85% of the U.S. individual life insurance annualized premium market.

Holes in benefit coverage persist for many millions

Despite the strong growth sparked by the devastating effects of the Covid-19 virus on the population, there is still a coverage gap. 

While the results of the survey showing increased popularity of life products is encouraging, Levenson added that LIMRA’s research “suggests there are more than 100 million Americans living with a life insurance coverage gap.”

A quick review of GoFundMe online fundraisers on social media and o the site show families stricken with costs for burial and ongoing needs after a tragic Covid-19 death. However, the spike in interest in providing benefits to loved ones in the event of one’s death helped fuel these record sales of life insurance.

Policymakers scrutinizing company ownership as popularity increases

The significant upswing in life insurance sales comes at a time when there is also a piqued interest by federal and state policymakers in the also significant change in ownership of billions in insurance assets over the past decade to private equity firms, as these firms voraciously buy up life insurance holdings. 

Size matters

Five of the largest private equity firms all now hold insurance assets, representing 15% to 50% of their total assets under management while 15 alternative asset managers have entered, or plan to enter the insurance market, according to a February report by McKinsey & Company cited by Sen. Sherrod Brown, D-Ohio, chair of the Senate Banking, Housing and Urban Affairs Committee in a letter March 16.

 The number of private equity -owned U.S. insurers numbered 117 at year-end 2020 while total cash and invested assets for these insurers was about $487 billion, according to the National Association of Commissioners (NAIC).

Brown was writing to the director of the Federal Insurance Office (FIO) based at the U.S Treasury as well as to the NAIC to express concern about policyholder and pension funds paying premiums to what he sees as “riskier firms with less experience in the insurance business.” 

State regulators pushing for answers, too

These asset managers and private equity funds often take on much higher risk, he noted in his letter. 

“While investment firms might benefit from huge profits in the short term, failure to adequately manage these risks may ultimately cost policyholders their retirement incomes,” Brown warned.

The Banking Committee chair also noted that the NAIC has already been probing these private equity firms’ deals and scrutinizing their sometimes more complex and opaque investment activities.

FIO, NAIC expected to report back this spring

Brown asked FIO, in consultation with NAIC, to collect relevant data from insurers, analyze it and then report back to his committee by May 31 answering a list of six concerns, from transparency to investment strategy to protections for consumers, pension funds and retirees.