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Home / Insurance / News /  Pandemic boom for life-insurance policies is fading

Pandemic boom for life-insurance policies is fading

As the world is overcoming from the COVID pandemic, the boon in insurance policies is fading away

As fears of Covid-19 ebbed, applications for policies fell 6.5% year to date through mid-August, compared with the same period in 2021

A Covid-19-driven life insurance buying spree has ended, with sales activity falling back nearly to prepandemic levels, according to new data from two industry research firms.

A Covid-19-driven life insurance buying spree has ended, with sales activity falling back nearly to prepandemic levels, according to new data from two industry research firms.

Applications for life-insurance policies fell 6.5% year to date through mid-August, compared with the same period in 2021. They are down 1.5% in that period compared with 2020, when fear about the coronavirus began translating into increased shopping for policies, according to MIB Group Inc., an organization that tracks applications for life insurers.

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Applications for life-insurance policies fell 6.5% year to date through mid-August, compared with the same period in 2021. They are down 1.5% in that period compared with 2020, when fear about the coronavirus began translating into increased shopping for policies, according to MIB Group Inc., an organization that tracks applications for life insurers.

Application volume year-to-date through mid-August is up 2% compared with the same period in 2019, meaning that the industry hasn’t given back all of its sales momentum, said MIB Chief Operating Officer Andrea Caruso. Historically, about 70% of applications end up in purchases.

“The headlines totally do impact sales," Ms. Caruso said. “If things aren’t front and center, people don’t think of them immediately."

Changes made during Covid-19 could keep sales up, the industry hopes. During the pandemic, many carriers expanded online and other direct-to-consumer options. Some relaxed requirements for blood and urine samples, and some stepped up use of digital medical records as a way to size up the health risk of applicants and avoid ordering new in-person tests.

Still, a sales rebound will face obstacles besides people’s procrastination. Among them: Since mid-2020, some prominent life insurers have either entirely quit selling a highly popular type of policy known as “guaranteed universal life." Such policies promise that the annual premium bill won’t increase during the owner’s lifetime. That means the insurer is on the hook for any miscalculations it makes in its original pricing. In other types of universal life, consumers bear the risk of premium increases.

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As evidence of the risks, Prudential Financial Inc. took a $1.1 billion second-quarter charge to strengthen its reserves, mostly tied to its past sales of guaranteed universal-life policies. Prudential was among insurers that quit new sales in 2020.

Prudential said it underestimated how many policyholders would hold on to the policies rather than cancel them. That will make the company responsible to pay more death benefits than previously assumed.

Insurers cut back on these policies and broadly raised prices after interest rates collapsed during the pandemic. Life insurers earn much of their profit by investing customers’ premiums in bonds until claims come due and low rates hurt those returns.

Those rates are now rising, as the Federal Reserve fights inflation. But sales of the guaranteed policies are unlikely to pick up soon, industry executives and analysts say.

Some financial advisers who long have favored the guaranteed policies regret the shrinkage in the number of insurers still issuing them. “We are professional worriers on behalf of our clients, wanting them to be safe with no unexpected surprises," said John Resnick, principal of The Resnick Group, based in Naples, Fla.

Industry research firms said other factors are at play in this year’s sales decline, besides Covid-19 moving out of the headlines. Industry-funded research firm Limra said its quarterly Consumer Sentiment Study shows that economic concerns have risen, prompting most Americans to make changes to their spending. Consumers reported cutting back on discretionary spending among efforts to trim expenses.

According to Limra’s preliminary data for this year’s first half, sales by policy count fell 9% from the year-earlier period, which experienced record-high growth. That puts sales level with the first half of 2019, Limra said. More recent figures aren’t yet available.

This story has been published from a wire agency feed without modifications to the text.

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