Despite the economic pressures of inflation,
life insurance volumes remain stable
By Len Strazewski
Inflation is one of the hottest issues in the 2024 election campaigns and while employers may fear inflation’s higher costs of doing business, they may be missing life insurance-based inflation protection for employees.
While many employers provide employer-paid life insurance with options to buy additional coverage, life insurance benefits haven’t changed much to accommodate higher housing and grocery costs and other changes in the economy, insurers and researchers say.
“We have seen a growing trend lately where employers offer an employee-paid whole life policy. This offering is being made to all employees, not just executives.”
—John Thornton
Executive Vice President
Amalgamated Life Insurance Company
Life insurance volume has remained stable for the past several years, despite the economic pressures of inflation and the COVID epidemic, researchers say. U.S. life insurance ownership has remained relatively steady since 2021, with about half of adults reporting having coverage.
The latest LIMRA study, now in its 14th year, finds a record-high number of American adults—about 42%, representing 102 million individuals—saying that they need (or need more) life insurance. Also, about 37% of consumers say they intend to purchase coverage within the next 12 months.
The 2024 Insurance Barometer Study, conducted jointly by nonprofit industry trade associations LIMRA and Life Happens, reveals that middle-income Americans (those with a household income of $50,000 to $149,999) represent the largest market opportunity for the industry. Four in 10 middle-income Americans, or 50 million adults, acknowledge they live with a life insurance coverage gap. This group also expressed a greater intent to buy life insurance (39%) than the general population.
“Engaging the middle market continues to be a high priority for life insurers. These households are more likely to own life insurance (55%) and more likely to recognize the important role it plays in their family’s financial security,” says John Carroll, senior vice president and head of life and annuities for LIMRA and LOMA.
“Yet,” he adds, “like other consumers, they have little understanding about what and how much life insurance they should buy or how much it actually costs. This leads to indecision and inaction.”
However, insurers and their agents and brokers are working harder to educate employers about the value of life benefits and promoting employer-based coverage. While life insurance has remained stable overall as a personal line of coverage, employers are creating more opportunities for employers to provide supplemental coverage to their employees who need to protect more expensive assets or fund bigger future expenses.
“Employee benefits—including life insurance—remain an important foundation for how employers care for their workforce. They help working Americans and their families create financial stability for uncertain times,” explains Andrew Marsh, head of product management for Group Benefits at The Hartford. And they have for a long time.
“Life insurance—or losing a loved one—is not something people want to think about, but being prepared and having that cash payment can make a difference in beneficiaries being able to maintain their current lifestyle,” he says.
“At The Hartford, we work closely with our broker partners and employer customers to understand the needs of their workers and tailor the life insurance benefits to meet those needs.”
Marsh says that employee benefit plans remain the most economical way that individuals can acquire life insurance. Though most employers still pay for only a limited amount of term life insurance, either a flat amount or a multiple of salary, many make supplemental coverage available through the employe benefits plan either independently or as a companion to supplemental accident or hospital insurance.
“Engaging the middle market continues to be a high priority for life insurers. These households are more likely to own life insurance and more likely to recognize the important role it plays in their family’s financial security.”
—John Carroll
Senior Vice President and Head of Life and Annuities
LIMRA and LOMA
The ability to “buy up” greater coverage through an employer is an affordable way to obtain life insurance coverage, Marsh says.
“The value of purchasing life insurance through an employer is the cost,” he explains. “Because these are group plans and employees are in a pooled risk, the cost is generally less than what they would be able to access if they were to purchase a policy on their own. Employers typically sponsor or pay for a basic life insurance plan, and then offer supplemental life insurance that can be purchased by the employee.”
The Hartford and other insurers also emphasize the need for education for both employers and their employees, so supplemental benefits can be chosen by employees and delivered effectively by employers, he adds.
“As an insurer, we are here to help our employer customers educate their employees so that the employees understand their benefits. This helps workers select the right benefits to support their families and helps them prepare for when they may need to use those benefits,” Marsh says.
“We know people’s needs change as they go through life and there may be different life circumstances that may cause them to consider certain benefits, which is why continued education is important. For example, someone who is newly married or starting a family might think more about adding to their life insurance,” he adds.
Through their agents and brokers, The Hartford encourages employers to provide year-round benefits education to remind employees about the benefits they may have signed up for, so they are ready to use them in their time of need and to help them be better prepared for their next open enrollment. Marsh says that storytelling in benefits education can help employees see how the benefits they are offered can make a difference in their lives.
“Life insurance—or losing a loved one—is not something people want to think about, but being prepared and having that cash payment can make a difference in beneficiaries being able to maintain their current lifestyle.”
—Andrew Marsh
Head of Product Management, Group Benefits
The Hartford
Group life insurance policies have evolved to include support for the employees who purchase the policies as well as their beneficiaries. New employee services include funeral pre-planning and negotiation to provide peace of mind during the final stages of life, estate planning guidance and resources, including support for drafting a will and creating a last wishes document, and emotional, legal and financial guidance through difficult times, he says.
Also, group life insurance policies can offer a living benefit option that provides advanced life insurance benefits for terminally ill employees or dependents, he says.
John Thornton, executive vice president of Amalgamated Life Insurance Company, says benefit plans are being designed with a much more strategic perspective for both employers and employees.
He explains, “Employers are considering what their goals are with respect to life benefits and how will the company and its employees benefit from a particular plan design. ‘Do we want to offer insurance to all employees, or do we want to be selective? What are the needs of our employees from each generation? Do we want to ask for employee contributions? What will be the financial impact of a particular plan design?’”
Employers are pushing an evolution of benefits to track with changes in the U.S. economy. As part of the insurance benefits evolution, some companies are offering term policies that are paid for by the company alongside employee-paid term policies that are portable or whole life coverages that are also portable and provide cash values, he says.
Thornton says some insurers and their clients’ employees believe that they should have life insurance coverage that would replace seven to 10 times their annual salary, depending on their life circumstances, such as tenure with the company, marital status dependents, health, and financial status, including income, assets and debt.
Typically, employers offer group term life insurance due to its cost-effectiveness. “We have seen a growing trend lately where employers offer an employee-paid whole life policy,” Thornton observes. “This offering is being made to all employees, not just executives.”
Employers can also offer enhanced life-based benefits to support key executives. “Businesses have many options in how they structure life insurance benefits for executives and/or key employees,” Thornton says. “They typically will develop a higher level of insurance benefit to these employees. For example, executive life benefit plans can be a replacement or supplement to group term life insurance benefits.
“[T]he biggest challenge is preparing employees to make the choices that benefit their families the best.”
—Rob Czerwinski
Regional Sales Manager
Illinois Mutual Life Insurance Company
“They can be owned by the executive or the organization, are portable, and can be effective in lowering an executive’s taxes and generating tax-advantaged retirement income. There is the Section 162 executive bonus plan, wherein life insurance is integrated as a bonus.”
Illinois Mutual Life Insurance Company maintains close communication with its agents and brokers and employer clients, the company says. In addition to term life insurance, the company also markets disability and worksite supplemental benefits.
Regional Sales Manager Rob Czerwinski says the company has been innovative with its “benefits bank” structure that allows employees to make broader choices and create more flexibility in the way they use benefits.
“The issue now is broader access,” Czerwinski says. “What do employees have access to among their benefit options? But the biggest challenge is preparing employees to make the choices that benefit their families
the best.”
Agents and brokers are responsible for educating employees about their options, so Illinois Mutual also encourages agents to hold mandatory employee meetings to explain benefits structure and options. Term life insurance is always the cheapest option, but employers can always structure a benefit bank to allow employees to fund benefits that meet the immediate needs of their families.
For more information:
Amalgamated Life Insurance Company
amalgamatedbenefits.com
The Hartford
thehartford.com
Illinois Mutual Life Insurance Company
illinoismutual.com
LIMRA and LOMA
limra.com
The author
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.
