Scary Statistic Presents Challenge For Life Insurers
April 6, 2014 by Linda Koco
CHICAGO – A whopping 76 percent of consumers are only slightly likely or not likely at all to buy life insurance next year, according to the 2014 Insurance Barometer Study published jointly by Life Happens and LIMRA.
“That’s one of the scariest statistics in the report” and it represents a “challenge” for the industry, said Matt Derrick, executive vice president-programs and marketing at Life Happens.
The finding is “potentially disturbing” since those who actually do buy will represent a much smaller percent of the population, added Todd A. Silverhart, corporate vice president and director of insurance research at LIMRA.
Derrick and Silverhart discussed some of the study’s findings with InsuranceNewsNet in advance of a presentation they will give at a workshop here at the start of the annual Life Insurance Conference. The annual conference is co-sponsored by LIMRA, LOMA, Society of Actuaries, and the American Council of Life Insurers.
Hopeful, Surprising, Compelling
The 2014 report also contains hopeful, surprising, and/or compelling findings.
Hopeful. The study found that consumer financial concerns are coming down in all areas tracked by the study over the past four years, Derrick said.
Those concerns range from having enough money for a comfortable retirement to paying for medical expenses, paying of long-term care services, supporting oneself if disabled and unable to work, paying monthly bills, and seven other areas of keen interest to life insurers.
The decline isn’t dramatic, Derrick said. For example, the 2014 survey found that 64 percent of consumers reported feeling concerned about having enough money for a comfortable retirement. That’s down from 67 percent the year before, 71 percent in 2012 and 66 percent in 2011. Still, the decline is significant, given that this particular concern ranks as the highest of the 12 concerns on the list.
Those concerned about the second leading issue, paying for medical expenses, dropped to 55 percent in 2014 from 62 percent in 2011. Those concerned about the third-ranked concern, paying for long-term care services, dropped to 52 percent from 56 percent in 2011.
Derrick’s take is that consumers are feeling more hopeful about their finances this year.
Surprising. One surprise in the research is that the under-25 age group ranked having a cell phone and having access to the Internet as being on par with eating and having a roof over their heads, with only a 3 percent differential in the categories. By comparison, the next age group — people ages 25-44 — had an 18 percent differential in the answers, with eating and housing ranking above cell phone and internet.
The rankings came in response to a question the researchers had asked to elicit understanding about priorities that get in the way of consumers buying life insurance, Derrick noted.
That today’s young adults view cell phones and Internet as essential living expenses is significant for the insurance industry, he said. “These are new essentials, ones that didn’t exist some years ago.” In the next five to six years, today’s under-25s will be the consumers with whom the industry will be interacting, so “all the companies will be focusing on this.”
Compelling. One finding was “particularly compelling” where the need for life insurance is concerned, Silverhart said. This has to do with how quickly consumers believe they would feel the impact of the loss of the family’s primary wage-earner.
LIMRA’s 2010 Ownership Study found that 66 percent of consumers would be “in trouble” either immediately or within several months, he recalled.
In the 2014 Barometer study, 53 percent answered they would feel the impact “within one year.” Only 20 percent answered “two years or more,” and almost one-third—28 percent—said they didn’t know how long.
These numbers highlight how vulnerable many of today’s consumers are, Silverhart said.
But the findings also point to opportunity for the insurance industry. “The industry provides the products the specifically help people with that vulnerability,” he explained. There is also opportunity for advisors to help clients grasp their situation through needs analysis and financial planning, he said.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda may be reached at linda.koco@innfeedback.com.
