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Life Insurance - US - February 2012

The U.S. life insurance business has been hit hard by the recent recession and the resulting changes in consumer behavior. The percentage of U.S. adults with life insurance is at an all-time low. Millions of consumers feel they either can’t afford life insurance or can do without it. Historically low interest rates, along with volatile financial markets have made it difficult for insurers to create attractive, profitable products. They also face potential new regulation at the federal level. At the same time, consumers say they don’t trust insurance companies and their agents.

This study is a comprehensive report on these challenges, as well as opportunities for the U.S. life insurance industry, with a particular spotlight on market and profit drivers, the competitive landscape, consumer behaviors and attitudes, and the regulatory and legislative environment.

Some of the major issues addressed in this report include:

  • What are the main factors driving the life insurance business?
  • How do consumers feel about insurance companies and their agents?
  • What are some of the new innovations in the industry?
  • What challenges will life insurers face in 2012 and beyond?

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Table of contents

  1. Scope and Themes

      • What you need to know
        • Data sources
          • Consumer study data
            • Advertising creative
              • Abbreviations and terms
                • Terms
                  • Companies mentioned in this report:
                  • Executive Summary

                    • Industry overview
                      • The consumer
                        • Consumer trust is a major concern for insurers
                          • The consumer’s view on new product ideas
                            • Blacks have a higher opinion of insurers, but have less coverage
                              • Marketing strategies
                                • Who are the innovators?
                                • Insights and Opportunities

                                    • Key points
                                      • Blacks are a receptive and untapped market
                                        • Hispanic market to grow strongly, but requires special handling
                                          • Insurers need to use predictive modeling more to enhance marketing
                                          • Inspire Insights

                                              • Trend: The Big Issue
                                                • What we've seen
                                                  • Industry application
                                                    • Trend: Life Coaching
                                                      • What we've seen
                                                        • Industry application
                                                        • Market Size

                                                          • Key points
                                                            • Life insurance premium income is down sharply since 2000
                                                              • Figure 1: Life insurance industry statistics, 2010 versus 2009 and 2000
                                                            • Health insurance premiums buck the trend
                                                            • Competitive Context

                                                              • Key points
                                                                • Weak economy, low rates continue to test life insurers
                                                                  • Regulation: The new Federal Insurance Office
                                                                    • Possibility that the FIO will challenge existing regulators
                                                                      • Taxation: Life insurance at risk in congressional debates
                                                                      • Segment Performance

                                                                        • Key points
                                                                          • Millions of people are choosing to do without life insurance
                                                                            • Life insurance in force down nearly 15% since 2007
                                                                              • Figure 2: Life insurance in force, 2005-10
                                                                            • Individual life purchases down 12% since 2007
                                                                              • Figure 3: Life insurance purchases, 2005-10
                                                                            • Life insurance premium receipts off by nearly one third since 2008
                                                                              • Figure 4: Individual life insurance premium receipts, 2005-10
                                                                            • Insurance industry total income down 9% since 2007 peak
                                                                              • Figure 5: Life insurance industry income, 2005-10
                                                                          • Marketing Channels

                                                                            • Key points
                                                                              • Dabbling days are over: Life insurers need to do more online…
                                                                                • …but they need to do it without alienating brokers
                                                                                • Market Drivers

                                                                                  • Key points
                                                                                    • As U.S. population ages, so does the typical insurance applicant
                                                                                      • Figure 6: U.S. population projections by age groups, 2010-50
                                                                                      • Figure 7: U.S. life expectancy, by sex, 2010-50
                                                                                    • An older population should benefit life insurers
                                                                                      • Figure 8: Age distribution of U.S. life insurance applicants, in percentage terms, 2006-10
                                                                                      • Figure 9: Age distribution of U.S. life insurance applicants as per cent of population, 2010
                                                                                    • Hispanics will account for vast majority of new population growth
                                                                                      • “Dependency ratio” to rise sharply
                                                                                      • Leading Companies

                                                                                        • Key points
                                                                                          • Number of life companies drops 28% compared to 2000
                                                                                            • Largest companies by asset size
                                                                                              • Figure 10: Largest life insurance companies, by total assets, 2010
                                                                                            • Largest companies by total insurance in force
                                                                                              • Figure 11: Largest life insurance companies, by total insurance in force, 2010
                                                                                            • Largest companies by net premiums
                                                                                              • Figure 12: Largest life insurance companies, by total net premiums, 2010
                                                                                            • Largest companies by group insurance
                                                                                              • Figure 13: Largest life insurance companies, by group insurance in force, 2010
                                                                                            • Largest companies by individual insurance
                                                                                              • Figure 14: Largest life insurance companies, by individual insurance in force, 2010
                                                                                            • Metlife
                                                                                              • Prudential
                                                                                                • Northwestern Mutual
                                                                                                  • AEGON/Transamerica
                                                                                                    • New York Life
                                                                                                      • Lincoln National
                                                                                                        • Hartford
                                                                                                          • Manulife Financial (John Hancock)
                                                                                                            • MassMutual
                                                                                                              • AXA Equitable
                                                                                                                • AIG
                                                                                                                  • Principal Financial
                                                                                                                    • Genworth
                                                                                                                    • Brand Qualities

                                                                                                                      • Key points
                                                                                                                        • Ameriprise, TIAA-CREF, Transamerica get top satisfaction ratings
                                                                                                                            • Figure 15: Top rated life insurance companies, by customer satisfaction, 2011
                                                                                                                        • Innovation and Innovators

                                                                                                                          • Key points
                                                                                                                            • Hartford says it can deliver insurance to customers in just five days
                                                                                                                              • Hartford wins patent for accelerated death benefit for chronically ill
                                                                                                                                • Prudential term policy waives premiums for unemployed and disabled
                                                                                                                                  • Transamerica option lets holders control monthly benefit payments
                                                                                                                                    • New York Life introduces customizable term product
                                                                                                                                      • John Hancock iPad app lets agents generate mobile insurance illustrations
                                                                                                                                        • AXA Equitable creates online game to educate about life insurance
                                                                                                                                          • Can insurance be sold directly to consumers in retail stores?
                                                                                                                                          • Marketing Strategies

                                                                                                                                            • Key points
                                                                                                                                              • Direct mail volume for life insurers drops in 2011
                                                                                                                                                • Representative direct mail advertising
                                                                                                                                                  • Figure 16: Gerber Life email ad, November 2011
                                                                                                                                                  • Figure 17: Metlife email ad, November 2011
                                                                                                                                                  • Figure 18: PruLife direct mail ad, October 2011
                                                                                                                                                  • Figure 19: The Hartford Mortgage Life insurance direct mail ad, November 2011
                                                                                                                                                  • Figure 20: The Hartford/AAA direct mail ad, September 2011
                                                                                                                                                  • Figure 21: Matrix Direct e mail ad, November 2011
                                                                                                                                                  • Figure 22: United of Omaha direct mail ad, November 2011
                                                                                                                                                  • Figure 23: Northwestern Mutual direct mail ad, July 2011
                                                                                                                                                  • Figure 24: Transamerica direct mail ad, November 2011
                                                                                                                                                  • Figure 25: Genworth Financial direct mail ad, November 2011
                                                                                                                                                  • Figure 26: New York Life/AARP direct mail ad, November 2011
                                                                                                                                              • The Consumer—Life Insurance Ownership

                                                                                                                                                • Key points
                                                                                                                                                  • Fewer people carry life as compared to other types of insurance
                                                                                                                                                    • Figure 27: Types of insurance owned, November 2011
                                                                                                                                                    • Figure 28: Types of insurance owned, by gender, November 2011
                                                                                                                                                  • Likelihood of buying insurance rises with age
                                                                                                                                                      • Figure 29: Types of insurance owned, by age, November 2011
                                                                                                                                                    • Highest earners are most likely to purchase their own insurance
                                                                                                                                                      • Figure 30: Types of insurance owned, by household income, November 2011
                                                                                                                                                    • Blacks, Hispanics less likely to be covered by employer-provided plans
                                                                                                                                                      • Figure 31: Types of insurance owned, by race/Hispanic origin, November 2011
                                                                                                                                                    • Urban dwellers less likely to own life insurance
                                                                                                                                                      • Figure 32: Types of insurance owned, by area, November 2011
                                                                                                                                                  • The Consumer—Attitudes about Insurance

                                                                                                                                                    • Key points
                                                                                                                                                      • Most think insurance is necessary, but have doubts about it as an investment
                                                                                                                                                        • Figure 33: Attitudes about life insurance, November 2011
                                                                                                                                                        • Figure 34: Attitudes about life insurance, by gender, November 2011
                                                                                                                                                      • Highest earners in particular doubt insurance’s value as an investment
                                                                                                                                                        • Figure 35: Attitudes about life insurance, by household income, November 2011
                                                                                                                                                      • Blacks place a higher value on need for insurance
                                                                                                                                                          • Figure 36: Attitudes about life insurance, by race/Hispanic origin, November 2011
                                                                                                                                                      • The Consumer—Reasons for Buying Life Insurance

                                                                                                                                                        • Key points
                                                                                                                                                          • Most compelling reasons to buy life insurance
                                                                                                                                                              • Figure 37: Reasons for buying life insurance, November 2011
                                                                                                                                                              • Figure 38: Reasons for buying life insurance, by gender, November 2011
                                                                                                                                                            • Reasons to buy life insurance vary by age
                                                                                                                                                              • Figure 39: Reasons for buying life insurance, by age, November 2011
                                                                                                                                                              • Figure 40: Reasons for buying life insurance, by household income, November 2011
                                                                                                                                                            • Non-whites see more value in insurance to help with educational expenses
                                                                                                                                                              • Figure 41: Reasons for buying life insurance, by race/Hispanic origin, November 2011
                                                                                                                                                          • The Consumer—Buying Intentions

                                                                                                                                                            • Key points
                                                                                                                                                              • Bad news: Nearly four in 10 have no plans to purchase life insurance
                                                                                                                                                                • Figure 42: Intention to buy/not buy life insurance, November 2011
                                                                                                                                                                • Figure 43: Intention to buy/not buy life insurance, by gender, November 2011
                                                                                                                                                              • However, response varies greatly by age; youngest are most likely to buy
                                                                                                                                                                • Figure 44: Intention to buy/not buy life insurance, by age, November 2011
                                                                                                                                                              • Lowest earners are least likely to buy insurance
                                                                                                                                                                • Figure 45: Intention to buy/not buy life insurance, by household income, November 2011
                                                                                                                                                              • Blacks much more likely to say they intend to buy insurance
                                                                                                                                                                • Figure 46: Intention to buy/not buy life insurance, by race/Hispanic origin, November 2011
                                                                                                                                                              • Cost is a big barrier to buying insurance
                                                                                                                                                                • Figure 47: Statements on life insurance, by gender, November 2011
                                                                                                                                                              • Many young people dawdle when it comes to buying insurance
                                                                                                                                                                • Figure 48: Statements on life insurance, by age, November 2011
                                                                                                                                                            • Is Consumer Mistrust Hurting Business?

                                                                                                                                                              • Key points
                                                                                                                                                                • Lack of trust is a deterrent to sales
                                                                                                                                                                    • Figure 49: Statements regarding trust and insurance companies, November 2011
                                                                                                                                                                    • Figure 50: Statements regarding trust and insurance companies, by gender, November 2011
                                                                                                                                                                  • Trust in insurers varies with age
                                                                                                                                                                      • Figure 51: Statements regarding trust and insurance companies, by age, November 2011
                                                                                                                                                                    • Lack of trust is particularly deterring non-whites
                                                                                                                                                                      • Figure 52: Statements regarding trust and insurance companies, by race/Hispanic origin, November 2011
                                                                                                                                                                    • Trust in current life insurer vs. others in the industry
                                                                                                                                                                        • Figure 53: Trust attributes for all insurance companies, November 2011
                                                                                                                                                                        • Figure 54: Trust attributes for current life insurance company, November 2011
                                                                                                                                                                        • Figure 55: Trust attributes for life insurance companies, comparison table, November 2011
                                                                                                                                                                    • The Consumer: Desirable Product Features

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Consumers interested in a product with lower premiums for healthy living
                                                                                                                                                                          • Figure 56: Most attractive features for life insurance, November 2011
                                                                                                                                                                          • Figure 57: Most attractive features for life insurance, by gender, November 2011
                                                                                                                                                                        • Older people would prefer more coverage as benefit for staying healthy
                                                                                                                                                                          • Figure 58: Most attractive features for life insurance, by age, November 2011
                                                                                                                                                                        • High earners prefer premium rebate for healthy living
                                                                                                                                                                          • Figure 59: Most attractive features for life insurance, by household income, November 2011
                                                                                                                                                                        • Some consumers will pay just as much for policy that pays only for specific causes of death
                                                                                                                                                                            • Figure 60: Monthly premium will pay for $100,000 policy that covers death from any cause, November 2011
                                                                                                                                                                            • Figure 61: Monthly premium will pay for $100,000 policy that covers death from any cause, after terrorist attack, November 2011
                                                                                                                                                                            • Figure 62: Monthly premium will pay for $100,000 policy that covers death from any cause, after fatal flu outbreak, November 2011
                                                                                                                                                                            • Figure 63: Monthly premium will pay for $100,000 policy that covers only for terrorist attacks, after terrorist attack has occurred, November 2011
                                                                                                                                                                        • Appendix: Simmons Cohort Analysis

                                                                                                                                                                            • The average life insurance coverage is $153,000
                                                                                                                                                                              • Figure 64: Value of current life insurance policy, by gender, 2011
                                                                                                                                                                            • Oldest and youngest consumers have the least coverage
                                                                                                                                                                              • Figure 65: Value of current life insurance policy, by gender, 2011
                                                                                                                                                                            • Insurance coverage rises sharply with household income
                                                                                                                                                                              • Figure 66: Value of current life insurance policy, by household income, 2011
                                                                                                                                                                            • Asians have the most coverage, blacks the least
                                                                                                                                                                              • Figure 67: Value of current life insurance policy, by race and Hispanic groups, 2011
                                                                                                                                                                          • Appendix: Trade Associations

                                                                                                                                                                            Companies Covered

                                                                                                                                                                            • AEGON USA Inc
                                                                                                                                                                            • Aetna Inc.
                                                                                                                                                                            • AIG American General
                                                                                                                                                                            • AIG Group (American International Group Inc)
                                                                                                                                                                            • Allstate Corporation (The)
                                                                                                                                                                            • American Association of Retired Persons (AARP)
                                                                                                                                                                            • American Council of Life Insurance, Inc. (ACLI)
                                                                                                                                                                            • American Council Of Life Insurers
                                                                                                                                                                            • Ameriprise Financial Inc.
                                                                                                                                                                            • AXA Sun Life
                                                                                                                                                                            • Best Buy stores (USA)
                                                                                                                                                                            • CIGNA Corporation
                                                                                                                                                                            • Citigroup Inc.
                                                                                                                                                                            • Edward D. Jones & Co., L.P.
                                                                                                                                                                            • Equitable Life Assurance Society (The)
                                                                                                                                                                            • Ernst & Young
                                                                                                                                                                            • GE Life and Annuity Group
                                                                                                                                                                            • General Electric Company
                                                                                                                                                                            • Gerber Products Company
                                                                                                                                                                            • Great-West Life & Annuity Insurance Company
                                                                                                                                                                            • ING Group
                                                                                                                                                                            • Insurance Information Institute Inc.
                                                                                                                                                                            • Jackson National Life Insurance Company
                                                                                                                                                                            • John Hancock Financial Services, Inc
                                                                                                                                                                            • Liberty National Life Insurance Company
                                                                                                                                                                            • LIMRA International
                                                                                                                                                                            • Lincoln National Corporation
                                                                                                                                                                            • Manulife Financial Corporation
                                                                                                                                                                            • MassMutual (Massachusetts Mutual Life Insurance Company)
                                                                                                                                                                            • MetLife, Inc.
                                                                                                                                                                            • Mutual of Omaha Companies
                                                                                                                                                                            • National Association of Insurance Commissioners (NAIC)
                                                                                                                                                                            • New York Life Insurance Company
                                                                                                                                                                            • Northwestern Mutual Life Insurance Company (The)
                                                                                                                                                                            • Pacific Life Insurance Company
                                                                                                                                                                            • PricewaterhouseCoopers
                                                                                                                                                                            • Principal Financial Group, Inc.
                                                                                                                                                                            • Pruco Life Insurance Company
                                                                                                                                                                            • Prudential Financial, Inc
                                                                                                                                                                            • State Farm Insurance Companies
                                                                                                                                                                            • Sun Life Financial Inc.
                                                                                                                                                                            • Swiss Re
                                                                                                                                                                            • The Hartford Financial Services Group, Inc.
                                                                                                                                                                            • U.S. Bureau of the Census
                                                                                                                                                                            • Zurich Financial Services

                                                                                                                                                                            Life Insurance - US - February 2012

                                                                                                                                                                            £2,684.63 (Excl.Tax)