The coronavirus pandemic has triggered significant challenges for the life insurance industry. Historically low interest rates and continued market volatility combined with higher unemployment and operational disruptions caused by social distancing measures contributed to the decline in life insurance sales in the first half of 2020.
COVID-19 has also, however, increased consumer awareness about the need for life insurance. LIMRA research finds 6 in 10 Americans say they have a heightened awareness about the need for life insurance due to the pandemic and 29% say they are more likely to buy life insurance in the next 12 months in response to COVID-19. This represents 75 million Americans.
LIMRA researchers examined all of these conditions, as well the economic outlook, to develop a forecast (see chart below) for 2020, 2021 and 2022. In 2020, LIMRA expects the U.S. life insurance market to contract 3%-7%, compared with 2019 results, but predicts life insurance sales to slowly recover in 2021 and 2022.
“As economic conditions slowly improve post-vaccine and consumers become more confident in their financial outlook, we believe life insurance sales will begin to rebound in 2021 and return to pre-pandemic growth levels in 2022,” said Maureen Shaughnessy, research actuary, LIMRA Insurance Research. “In the next 6 to 12 months we expect whole life and term products to drive the market growth as companies rely more on automated underwriting and direct-to-consumer distribution.”
Second half of 2020 looks better than first
Due to increased consumer interest, growth in direct channels, and sales incentive programs, LIMRA forecasts whole life (WL) to rebound from the losses in the first half of 2020 and expects year-end results to be approximately level with 2019 sales.
In 2021, despite some slow recovery in the third and fourth quarters of 2020, whole life sales most likely will not overcome the downturn experienced in the first six months and will end the year below or level with 2020 results.
The pandemic highlighted the need for life insurance and led to increased consumer demand. Term insurance, due to its design and price, benefited and experienced strong growth throughout 2020.
LIMRA forecasts term insurance sales to increase as much as 7% in 2020. Post-vaccine, LIMRA expects term insurance growth to normalize as heightened consumer interest in life insurance diminishes. As a result, term life sales will be slightly positive in 2021. In 2022, as the world goes back to the way it was prior to the pandemic, LIMRA expects term insurance to return to the relatively flat growth it has generally experienced since the Great Recession.