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Solving The Life Insurance Sales Puzzle

LIMRA recently published a report titled “The Purchase Funnel,” which surveyed respondents who have primary or shared decision-making responsibility about finances, including insurance. One quarter of those households recognized in the previous 24 months that they had a need for life insurance. That translates to 31 million households — 31 million (or more) potential buyers for life insurance. Talk about potential!
However, more than two thirds of these needs are still unmet. Only 7 percent of households (9 million) actually went on to purchase a life insurance policy. This purchase statistic is consistent with sales research — LIMRA estimates that just under 9.8 million individual life insurance policies were sold in 2017.  
This is a familiar scenario that we have seen in the past. Consumers recognize the need for life insurance — most often prompted by life events such as marriage, births and deaths — but they don’t make it through to a purchase. They have their reasons: 
1. Competing financial priorities.
2. Misperceptions about cost.
3. The inability to make a decision. 
These are some of the factors that may result in lower market penetration. In fact, only 44 percent of households own an individual life insurance policy. So have people turned their known need into a purchase recently?
Individual life insurance sales growth has been modest at best in the past five years, averaging 1.6 percent for premium. LIMRA forecasts more of the same, with annual growth rates averaging just over 2 percent over the next four years. Overall sales have been lackluster, although there have been some pockets of success.  
Although 2018 sales started slow, with a decline of 2 percent in annualized premium for the first quarter, indexed universal life premium grew by 8 percent. IUL has been on a run, with increases in most quarters over the past several years (with a brief downturn following the implementation of new illustration requirements). IUL offers a combination of cash value increases based on stock market growth, and protections against stock market declines. This combination has been popular over the past several years, and many more carriers have entered the market.  
Whole life (until recently) has also done well since the Great Recession, likely because of the guarantees inherent in the product. However, sales of whole life have faltered somewhat in the past few quarters.  
On the other hand, lifetime guarantee UL has been mostly down for the past few years, a result of regulatory changes that led to higher prices and market exits. Both term insurance and variable UL sales have been flat, alternating between small increases and small decreases.  
The end result of these increases and decreases in products is very modest growth overall. There are still the 22 million households who recognized a need for life insurance but didn’t buy (and millions more who haven’t recognized the need). How can the life insurance industry reach these uninsured or underinsured households?  
That is the $64,000 question, and one that doesn’t have an easy answer.  
Perhaps new direct-to-consumer approaches will help chip away at the uninsured need. These approaches will likely use data-driven, customer-centric, automated methods to simplify the purchase process and make it more efficient.  
Maybe the workplace is part of the answer. Employees appreciate the vetting process employers conduct to offer voluntary life insurance and other products as part of their benefits package.  
One thing is clear: There is not one clear method that will solve the problem. LIMRA has robust research programs on all these topics to help our members reach households in need of the life insurance industry’s products. 

Elaine F. Tumicki, CLU, ChFC, LLIF, is corporate vice president, insurance research — product at LIMRA. Elaine may be contacted at [email protected] .

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