Towards the start of each year, the life insurance industry polls consumers and produces a wide range of life insurance statistics and facts about how well the average American is prepared for the possibility of an untimely death.
This year, consumers indicate they would rather be doing pretty much anything other than going through the entire life insurance buying process, because it’s no drive in the park.
2017 Life Insurance Statistics And Facts: Consumers Want Convenience!
The previous two year’s data showed the major improvements to the life industry were tech related, including moving applications online and wearable tech. This year’s results are actually not too far from the same, where American’s are valuing their time more than ever.
Did you know: the average fully underwritten life insurance policy takes up to 4-6 weeks from the time of application?
In the just the past few years alone, the entire industry has finally started to catch up with the times, where several companies are starting to allow applicants of all ages to purchase coverage without going through the entire underwriting process we’ve all been accustomed to. Where it started with just a handful, and was limited to final expense related products, now there are four times more carriers willing to offer basic term insurance while foregoing the medical.
Think about it…
If you had to sift through over 800 life insurance companies and a bunch of them were all priced the same, what would make you choose one or the other? For some, it’s all about brand recognition, but for the younger crowd, there is increased evidence it’s all about speed and convenience; they have better things to be doing with their time than figuring out the difference of one insurer to the next.
But is there a cost to this convenience? Of course.
Is everyone going to be able to buy this way? Nope. (Well, not yet, at least.)
Are there other options, entirely? Maybe!
What Do They Really Want, Though?
Financially speaking, life insurance and what it can provide for are barely on the list of what consumers are thinking about in 2017. Ahead of it are other financial concerns, like:
- Disability Income
- Medical Expenses
- Personal Debts
- Basic Living Costs/Housing
Just looking at the list, it’s clear there are both a short- and long-term focuses when looking at our finances, which is great, it’s just that life insurance is a low priority altogether. The irony here is, life insurance could provide all of these should a person pass away and the plan was suitably set up. In looking at this sentiment, how bad is it?
- Just 3% of all Americans said final expenses was a top concern, though 26% said it was very concerning.
How does this compare to retirement woes?
- 42% of those responding said they were extremely concerned with having enough funds for retirement, and 1 in 5 said it was their top financial concern for the year!
However, we do have good news on how people feel they are doing financially, as a whole. When looking at all things considered, both life insurance related and not:
- Consumers feel less pressure financially this year than last, which was the highest it has been since 2011. It’s the first decrease since 2014.
This Year’s Life Insurance Statistics
While it’s important to understand the entire landscape of who people are spending their money and what they are most worried about, we want to direct our attention to the aspects specifically related to life insurance.
A strange realization from this year study is how different people think when they are asked to gauge someone else’s needs versus their own. In fact, here’s the most shocking data:
- 84% of Americans would agree most people need life insurance, yet when asked, only 70% said they needed any.
How is it someone can assume nearly 9 out of 10 people need it, yet 3 in 10 think they are in the 10% who don’t? This is where a major gap in financial education and responsibility lies.
Yet, it only gets a little scarier. While 70% say they do, in fact, need coverage, how many actually do?
- 41% of Americans do not carry any life insurance.
- Of those who do, nearly a third have just a basic group policy.
The percentage of people who have some amount of life insurance hasn’t much changed year-to-year, despite the pressure of meeting financial goals having declined.
When asked about what a life insurance benefit should pay for, consumers did have a pretty good idea of how the money ought to be allocated, citing burial costs and replace of income being the top responses.
Interestingly enough, though, a good number of other reasons were acknowledged, too.
- More than half of respondents said life insurance should be owned to supplement retirement income, the highest it’s ever been.
While this brings up the often battled term versus whole life insurance debate, it does well to highlight how much consumers truly are thinking about their retirement accounts and ways to generate a long-term, stable income.
Perhaps the most interesting response, however was this:
- 34% of people who had responded mentioned they have had it for so long, they don’t even remember why they got it in the first place.
While it seems silly, this is probably due largely in part to agents not holding up their end of the bargain in keeping their clients current with annual reviews. A consumer should be doing this themselves, yes, but with long duration term policies lasting up to 30 years, it’s understandable they may have purchased it as true “set it and forget it” structured policy.
When segmenting the group of Americans who didn’t have any coverage in place, there were some interesting takeaways. For example:
- Almost half of people who owned no life insurance said they either didn’t need any or had enough already.
- 4 in 10 said they were under-insured, and the remainder didn’t know either way.
When asked about their spouse:
- 39% felt as though they wished their spouse or partner would buy more insurance, with 1 in 10 not even knowing how much they had, if any.
In the past 7 years, this was by far the highest percentage of partners who were concerned with the other’s coverage amount, having increased from just 27% back in 2015.
Why Don’t More Own Life Insurance Policies?
One of the ways the industry and its advisors seek to fill the gap is to try to understand why consumers don’t buy more life insurance in the first place. While it’s understood it’s a largely boring, non-tangible product, consumers admit to knowing they need it and still don’t make a purchase, every single year.
Here were the three most common answers:
- 66% say it’s just too expensive for them.
- 66% say other financial priorities take higher precedence.
- 54% feel they have as much as they need right now.
We gain even more insight when the groups are segmented by their age groups, divided into Millennials, Gen Xer’s, Baby Boomers, and Seniors:
- Half of all Millennials say they have never been approached by anyone to buy life insurance, and more than 4 in 10 think they wouldn’t qualify anyway. This was two times greater than any other age group.
When divided by gender, there was little less discrepancy. Of the respondents who offered their opinions:
- 82% of all women felt they had a good handle on what life insurance was, compared to 74% of men.
Upon being asked what would make them purchase more, over a dozen reasons were cited. However, one in particular stood out from the pack:
- 83% of Americans felt they would consider life insurance more intently if it was easier to understand. Millennials, ironically, felt they understood it most, with Seniors reporting the most difficult time understanding their purchase.
So, when Millennials were asked what they thought life insurance would cost, you’d think they have a good handle it, right? Think again.
When asked about what it might cost to purchase a $250,000 term life insurance policy, assuming the person was healthy and not a smoker, less than a third came close.
- Millennials were the worst (by a long shot) at guessing costs, expecting the price of a policy to be 3 to 4 times what it actually would. Only 7% of people underestimated the cost.
But above all, there is one thing which a vast majority all agreed would help them to make a purchase right now, if they were able.
Consumer Interest Is Strikingly In Favor of Skipping Exams
Waves of Americans say there would be a much higher likelihood of them buying life insurance today if they could purchase strictly by insurers using data, and bypassing the medical exam.
The top three reasons they felt a no exam life insurance policy was fitting were because they believed they:
- Were fast, easy, and simpler to buy.
- Had more transparent pricing and risk classifications.
- Were object and unbiased towards any one group.
While the smallest percentage felt it helped them to avoid meeting anyone in person, a much greater percentage also felt not seeing a doctor and not being poked with a needle were huge benefits to this type of policy.
Millennials, when segmented, were most concerned with how fast they could be approved, while the Gen X segment felt the lack of bias was key to their interest in these policies.
What Else Is There?
What if, for the sake of argument, there was an entirely different product a person could buy, unlike any other typical life insurance product from any one company? Would it make sense?
There are always disruptors to every industry, much like eBay and Amazon are to retail product sales, or Uber has been to the taxi and transportation industry.
Is there one for life insurance now, too, considering the propensity towards no exam policies?
Enter, peer-to-peer insurance.
As a an idea of interest, consumers were asked what they knew about, and what they thought of, a P2P exchange. The idea would be for people to be able to form their own pools, and essentially create group life insurance policies for which they all split the costs.
- 84% had never heard of this type of idea, with 11% saying they had but didn’t know exactly what it was.
When introduced to the idea with a bit of explanation, very few felt it was a viable alternative.
- 70% felt they were somewhat or very unlikely to get involved with this type of method to insure.
In the fast-paced informational and digital age we live in, there are still wide gaps between consumers and education for life insurance.
And, even when this gap is closed, consumers hold other financial obligations higher in priority.
Despite these gaps, Americans feel as though speeding up the purchasing process and using big data could mean policies are more favorable and convenient solutions. Alternate solutions, such as P2P insurance methodologies are an unlikely alternative, at least for now.
For its seventh year, in January 2017, LIMRA employed an online panel to survey adult consumers who are financial decision makers in their households. This resulted in the 2017 Insurance Barometer Study, by Life Happens and LIMRA. Responses were received from 2,031 individuals. The data were weighted by age, gender, education, race, region, and income to be representative of the general population. A propensity score adjustment was added to correct for biases inherent in Internet panels. The margin of error in this study is +/- 3 percentage points.