Vanessa_hamilton

Vanessa Hamilton

Updated at 2021-09-04 17:14:02 UTC

What is the best life insurance?

Life insurance ownership

About sixty percent of all people in the United States were covered by some type of life insurance in 2018, according to LIMRA’s 2018 Insurance Barometer Study. Other findings from the study include:

  • Among those with life insurance, about 1 in 5 say that they do not have enough.
  • Half of all adults visited a life company website and/or sought life insurance information online in 2018. Almost 1 in 3 purchased or attempted to purchase life insurance online — about the same as in 2017.
  • Consumers overestimate the cost of life insurance, especially younger generations; 44 percent of Millennials overestimate the cost at five times the actual amount.
  • Half of all consumers say they are more likely to purchase life insurance if priced without a physical examination.

 2019 financial results

Net income after taxes for the life/annuity insurance industry grew 18.1 percent in 2019 to $44.7 billion from $37.8 billion in 2018, according to S&P Global Market Intelligence. Net income before capital gains grew 21.1 percent in 2019 from 2018, but a net realized capital gains loss of $6.9 billion reduced the net income level to $44.7 billion. Premiums and annuity considerations rose 12.7 percent in 2019, following weak growth in 2018, reflecting the 26.8 rise in annuity premiums and deposits, as life insurance premiums were flat. Expenses grew slightly in 2019, up 0.4 percent, following a 10.6 percent increase in 2018. Capital and surplus rose to $422.2 billion in 2019, up 5.5 percent from $400.1 billion in 2018, according to S&P Global Market Intelligence.

 Life/Annuity Sector

Traditional life insurance is no longer the primary business of many companies in the life insurance industry. The emphasis has shifted to the underwriting of annuities, which accounted for 48 percent of life/annuity direct premiums written in 2018. Annuities are contracts that accumulate funds or pay out a fixed or variable income stream. An income stream can be for a set time period or over the lifetimes of the contract holder or beneficiaries. Accident and health insurance, which includes distinctive products apart from traditional health insurance, accounts for 27 percent of direct premiums written. Traditional life insurance products such as universal life and term life for individuals, and group life, remain an important part of the business, making up the remaining 25 percent of direct premiums written. In addition to annuities, accident and health, and life insurance products, life insurers may offer other types of financial services such as asset management.

Traditional health insurance, which is not included in this section and are not considered a part of the life/annuity sector, are described under Private Health Insurance. Health insurance pays for medical, surgical and hospital services received by the insured, as well as routine and preventive care, usually within a network format. Of the many types of plans available, most include a deductible paid by the insured, and benefits received are tax-free. Accident insurance and health insurance, which is included in the life/annuity and property/casualty (P/C) sectors, encompass a variety of specialty products related to health, such as reimbursement for the time a policyholder spent in a hospital or was disabled; short- and long-term disability based on employment; long-term care, and critical or catastrophic illness insurance. Accident and health insurance are not meant to replace health insurance.

 Life/Annuity Insurance Income Statement, 2015-2019 

($ billions, end of year)

 20152016201720182019Percent change,
2018-2019 (1)
Revenue      
     Life insurance premiums$151.4$115.0$137.1$145.1$145.1(2)
     Annuity premiums and deposits324.0318.5287.2269.7341.926.8%
     Accident and health premiums158.8162.8169.3183.1186.21.7
     Credit life and credit accident and health premiums1.41.31.31.3(3)NA
     Other premiums and considerations2.52.22.14.06.767.4
     Total premiums, consideration and deposits$638.2$599.9$597.1$603.2$679.912.7%
     Net investment income170.8173.0182.3187.4186.6-0.4
     Reinsurance allowance-86.4-17.0-25.132.0-29.7NA
     Separate accounts revenue35.234.736.637.336.8-1.4
     Other income90.561.349.244.048.810.7
     Total revenue$848.2$851.9$839.9$903.9$922.32.0%
Expense      
     Benefits263.9271.4281.4289.5302.24.4
     Surrenders273.0265.1308.9350.3339.6-3.0
     Increase in reserves80.5133.1106.4143.3120.6-15.9
     Transfers to separate accounts36.9-38.0-65.8-89.6-72.0NA
     Commissions55.564.658.058.361.24.9
     General and administrative expenses60.162.465.965.967.93.0
     Insurance taxes, licenses and fees10.510.88.810.79.3-13.4
     Other expenses-4.9-2.7-4.111.314.427.1
     Total expenses$775.5$766.6$759.4$839.8$843.20.4%
Net income      
     Policyholder dividends18.318.217.518.218.1-0.4
     Net gain from operations before federal income tax54.467.163.046.061.032.7
     Federal income tax10.616.312.43.49.4177.7
     Net income before capital gains$43.8$50.8$50.6$42.6$51.521.1%
     Net realized capital gains (losses)-3.5-11.4-8.6-4.7-6.944.6
     Net income$40.3$39.4$42.1$37.8$44.718.1%
     Pre-tax operating income54.467.163.046.061.032.7
     Capital and surplus, end of year354.0367.2380.7394.9400.05.5

(1) Calculated from unrounded data.
(2) Less than 0.1 percent.
(3) Data not available.

NA=Not applicable.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.


 Premiums by line

Annuities are the largest life product line as measured by direct premiums written and accounted for 48 percent of direct premiums written by life insurers in 2018. Accident and health insurance accounted for 27 percent of direct premiums written. Accident and health insurance, not to be confused with traditional health insurance, includes reimbursement for certain medical expenses. These include: short- and long-term disability; critical or catastrophic illness insurance; and long-term care. Life insurance accounted for the remaining 25 percent of direct premiums written. Life insurance policies can be sold on an individual, or ordinary, basis or to groups such as employees and associations. Other lines include credit life, which pays the balance of a loan if the borrower dies or becomes disabled and industrial life, small policies whose premiums are generally collected by an agent on a weekly basis.

 Direct Premiums Written By Line, Life/Annuity Insurance, 2017-2019 

($000)

Lines of insuranceDirect premiums
written (1)
Percent
of total 
Direct premiums
written (1)
Percent
of total 
Direct premiums
written (1)
Percent
of total 
 2017 2018 2019 
Annuities      
Ordinary individual annuities$181,849,76926.3%$207,806,48228.3%$217,475,93328.6%
Group annuities134,348,05919.4146,170,46719.9148,066,08419.5
Total$316,197,82845.7%$353,976,94948.3%$365,542,01748.1%
Accident and health (2)      
Group126,286,10418.3134,734,11918.4139,417,93318.4
Other63,725,7939.261,947,8228.463,817,8278.4
Credit830,9460.1852,5200.1888,7580.1
Total$190,842,84327.6%$197,534,46126.9%$204,124,51726.9%
Life      
Ordinary life143,537,90220.8142,275,94719.4149,041,50719.6
Group life39,856,0575.838,489,6035.239,744,3575.2
Credit life (group and individual)808,6210.1814,9350.1808,0780.1
Industrial life123,394(3)107,475(3)74,820(3)
Total$184,325,97326.7%$181,687,95924.8%$189,668,76325.0%
All other lines$3,839(3)$4,723(3)$5,093(3)
Total, all lines (4)$691,370,484100.0%$733,204,093100.0%$759,340,391100.0%

(1) Before reinsurance transactions.
(2) Excludes accident and health premiums reported on the property/casualty and health annual statements.
(3) Less than 0.1 percent.
(4) Excludes deposit-type funds.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.


 Credit life insurance

Credit life insurance, a form of decreasing term insurance, protects creditors such as banks. The borrower pays the premium, generally as part of the credit transaction, to cover the outstanding loan in the event he or she dies. The face value of a policy decreases as the loan is paid off until both equal zero. When loans are paid off early, premiums for the remaining term are returned to the policyholder. Credit accident and health, a similar product, provides a monthly income in the event the borrower becomes disabled.

 Credit Life, And Credit Accident And Health Insurance Direct Premiums Written, 2009-2018 

($000)

YearCredit lifeCredit accident and health
2009$1,248,117$964,004
20101,247,192929,774
20111,226,910930,094
20121,159,524957,294
2013977,557968,691
2014961,247955,261
2015915,437910,645
2016831,283829,033
2017807,136838,004
2018815,280857,886

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.


 Investments

Life/annuity and P/C insurers are key players in capital markets, with $9.0 trillion in cash and invested assets in 2019, according to S&P Global Market Intelligence. Life insurance and annuity cash and invested assets totaled $4.3 trillion in 2019, and separate accounts assets and other investments totaled $2.8 trillion. P/C insurer cash and invested assets were $1.9 trillion in 2019.

Because life insurance products are long-term, generally in force for 10 years or longer, payments are predictable. Therefore, life/annuity insurers invest primarily in long-term products. In 2019 life insurers, excluding separate accounts, invested 71 percent of their assets in bonds and 2 percent in corporate stocks. Life insurers invested 13 percent of their assets in mortgage loans on real estate that take seven years or longer to mature.

 Investments, Life/Annuity Insurers, 2017-2019 (1) 

($ billions, end of year)

 AmountPercent of total investments
Investment type201720182019201720182019
Bonds$2,973.5$2,989.1$3,087.872.97%72.48%71.11%
Stocks$104.9$94.1$105.32.57%2.28%2.43%
     Preferred stock10.512.312.90.260.300.30
     Common stock94.581.892.42.321.982.13
Mortgage loans on real estate$477.0$521.5$565.511.71%12.65%13.02%
     First lien real estate mortgage loans468.5512.6557.311.5012.4312.83
     Real estate loans less first liens8.68.98.30.210.220.19
Real estate$23.5$20.4$23.00.58%0.50%0.53%
     Occupied properties6.05.85.90.150.140.14
     Income generating properties17.014.116.00.420.340.37
     Properties for sale0.50.51.10.010.010.03
Cash, cash equivalent and short term investments104.7104.7118.72.572.542.73
Contract loans including premium notes128.9129.2131.03.163.133.02
Derivatives58.756.479.51.441.371.83
Other invested assets175.1187.1206.04.304.544.74
Receivables for securities5.34.55.00.130.110.11
Securities lending reinvested collateral assets16.912.615.50.410.300.36
Write-ins for invested assets6.44.55.30.160.110.12
Total cash and invested assets$4,074.8$4,124.1$4,342.5100.00%100.00%100.00%

(1) Data are net admitted assets of life/annuity insurers.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.


 Top 10 Writers Of Life/Annuity Insurance By Direct Premiums Written, 2019 

($000)

RankGroup/companyDirect premiums written (1)Market share (2)
1MetLife Inc.$95,079,32113.0%
2Prudential Financial Inc.56,206,1317.7
3Equitable Holdings44,721,3026.1
4New York Life Insurance Group33,425,3214.6
5Massachusetts Mutual Life Insurance Co.30,375,1274.2
6Lincoln National Corp.28,471,6883.9
7Principal Financial Group Inc.27,038,4003.7
8American International Group (AIG)25,684,2943.5
9Jackson National Life Group23,056,6753.2
10Transamerica22,360,1113.1

(1) Includes life insurance, annuity considerations, deposit-type contract funds and other considerations, and accident and health insurance. Before reinsurance transactions.
(2) Based on U.S. total, includes territories.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.


 Top 10 Writers Of Individual Life Insurance By Direct Premiums Written, 2019 

($000)

RankGroup/companyDirect premiums written (1)Market share
1Northwestern Mutual Life Insurance Co.$11,271,6408.4%
2Lincoln National Corp.8,255,7556.2
3New York Life Insurance Group8,009,9576.0
4Massachusetts Mutual Life Insurance Co.7,882,4985.9
5Prudential Financial Inc.6,212,7004.6
6John Hancock Life Insurance Co.4,812,7853.6
7State Farm4,748,6963.5
8Transamerica4,570,2383.4
9Pacific Life3,874,5632.9
10American International Group (AIG)3,571,4932.7

(1) Before reinsurance transactions. Based on U.S. total, includes territories. Excludes annuities, accident and health, deposit-type contract funds and other considerations.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.


 Top 10 Writers Of Group Life Insurance By Direct Premiums Written, 2019 

($000)

RankGroup/companyDirect premiums written (1)Market share
1MetLife Inc.$7,328,69820.8%
2Prudential Financial Inc.3,429,6609.7
3New York Life Insurance Group3,043,8208.7
4Securian Financial Group2,543,2807.2
5Cigna Corp.1,767,9925.0
6Unum Group1,713,0324.9
7Hartford Life & Accident Insurance Co.1,504,1154.3
8Lincoln National Corp.1,395,3264.0
9Nationwide Mutual Group1,036,2502.9
10Standard Life & Casualty Insurance Co.985,5852.8

(1) Before reinsurance transactions. Based on U.S. total, includes territories. Excludes annuities, accident and health, deposit-type contract funds and other considerations.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.


 Distribution channels

Life insurance was once sold primarily by career life agents, captive agents that represent a single insurance company, and by independent agents, who represent several insurers. Now, life insurance is also sold directly to the public by mail, telephone and through the Internet. In addition, in the 1980s insurers began to market annuities and term life insurance through banks and financial advisors, professional groups and the workplace. A large portion of variable annuities, and a small portion of fixed annuities, are sold by stockbrokers.

Independent insurance agents have held over half of the individual life insurance market over the 10 years from 2009 to 2018, but have lost some ground to affiliated agents and direct response companies, as shown in the charts below.

 Life Individual Market Share by Distribution Channel, 2010 and 2019 



Life Individual Market Share by Distribution Channel, 2010 and 2019

(1) Includes brokers, broker-dealers, personal producing general agents and registered investment advisers.
(2) Includes agency building, multiline exclusive and home service agents.
(3) No producers are involved. Excludes direct marketing efforts involving agents. Includes internet sales where consumers submit online applications.
(4) Includes financial institutions, worksite and other channels.

Source: U.S. Individual Life Insurance Sales Trends, Industry Estimates, 1975-2019, LIMRA, 2020.


 Online sales

Almost half of consumers of all ages (45 percent) would go online to find more information on life insurance, but would complete the purchase with an agent or financial advisor, according to the 2018 Insurance Barometer Study survey by the Life and Health Insurance Foundation for Education (LIFE) and LIMRA. Over half of Millennials would research life insurance online, but they would purchase life insurance from a financial professional.  Gen-Xers are the group most likely (32 percent) to research and complete the purchase entirely online.

 Other sales channels

 Worksite Life Insurance Sales By Line Of Business, 2018 


Worksite Life Ins Sale By Lin of Bus, 18
(1) Short-term and long-term disability.
Source: Eastbridge Consulting Group, Inc.

  • Worksite marketing is the selling of voluntary (employee-paid) insurance and financial products at the worksite. The products may be on either an individual or group platform and are usually paid through periodic payroll deductions.
  • Worksite sales of life and health insurance totaled $8.51 billion in 2018, up 4.5 percent from 2017.

 Separate Accounts

Separate accounts are funds held by life insurance companies that are maintained separately from the insurer’s general assets. They were originally established in response to federal securities laws concerning investment-linked variable annuities, according to the National Association of Insurance Commissioners. Variable annuities operate like mutual funds because their earnings vary as they invest in many different vehicles. Separate accounts have evolved rapidly in the past 20 years and now support an array of hybrid investment products.

Separate accounts contribute to the revenue of life/annuity insurers. (See Life/Annuity Insurance Income Statement, 2014-2018.) In 2018, separate accounts contributed $37.3 billion to the total amount of life/annuity insurance revenue of $905 billion.


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