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Turning Up the Volume on Life Insurance Ownership

LIMRA data suggest more than 87 million American households own some form of life insurance, and that number is on the rise. The volume of households owning life insurance has increased by 5 million in the past six years.

Volume will continue to grow. The total number of U.S. households grows by almost 1.5 million each year. If life insurance ownership rates remain stable, then ownership volume will continue to grow by about 1 million households per year.

Market penetration is stable. The study data reveal that 70 percent of households own life insurance. This level of market penetration is equal to what was recorded in 2010. The stability in market share is encouraging news, because market share had been declining gradually for the previous 50 years.

Between 1960 and 2010, the ownership rate for life insurance fell from 83 percent of U.S. households to 70 percent. Much of this loss in market share is recent. Between 2004 and 2010 there was an eight-point drop in market penetration.


But Millions Need More Coverage

Will market penetration start to decline again?

Jolts to the economy can have a significant impact on the life insurance industry. The Great Recession of 2007-2009 caused a substantial contraction in life insurance ownership rates. Consequently, analysis of the 2016 data indicates more than 60 million households now need more life insurance coverage.

With so many households underinsured, it’s unlikely that ownership rates will drop over the next few years. Instead, it’s possible that market penetration for life insurance will grow and that growth in life insurance volume will accelerate.

What is the sales potential in the underinsured market?

Among underinsured households, the average coverage gap is $200,000. With 60 million underinsured households in the market, it suggests the sales potential of the underinsured market is currently $12 trillion.

Here are the best opportunities for the industry in the underinsured market:


» Current life insurance owners. Half of the underinsured market consists of households that already own life insurance. The average coverage gap among these households is about $225,000, which equals a market opportunity of $7 trillion. This segment includes 9 million households that own group life only, that tend to have larger coverage gaps and that should be encouraged to buy coverage that complements their basic group policy.


» Higher-income households. About one in three underinsured households earns $100,000 or more per year. The average coverage gap in these households is almost $400,000, which equals a market opportunity of $6 trillion.


» Couples ages 45 and over. Couples ages 45 and over with no children represent one in five underinsured households. With an average need of almost $270,000 per household, they have a sales potential of $3 trillion.


The LIMRA data on life insurance ownership are very encouraging. The data surrounding the growth in ownership volume should be trumpeted across the industry to encourage everyone in the business. Here are some ways the industry can take advantage of this trend:


» Make sure marketing and distribution partners know they are part of a growing industry. This will help build momentum in business and consumer markets. Place more emphasis on trends in ownership volume than on trends in market penetration.


» Get consumers thinking about their life insurance coverage adequacy by using simple facts, e.g., half of all U.S. households are underinsured and the average coverage gap is about $200,000.


» Motivate consumers by asking them whether they want to be among the group that does not adequately protect their families. Do they know which group they are currently in?


The market need is there. The sales opportunities are there. There is positive momentum, and there is continued growth ahead.


James T. Scanlon, M.S., HIA, is senior research director, insurance research-markets, with LIMRA. He may be contacted at [email protected]

James T. Scanlon, MS, HIA, is a senior research director of insurance research for LIMRA, focusing on insurance product and service marketing. Jim may be contacted at [email protected] .

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