Women have come a long way to take hold of their finances. How can the insurance industry further their progress?

By Tasha Williams, Senior Research Writer and Max Dorfman, Research Writer

Women contribute more earnings to their households and feel more confident about personal finance than prior generations. However, they still face hurdles to taking charge of planning for their financial future and legacy.  

Findings from a new report, Lack of Knowledge and Confidence Deter Women from Purchasing Life Insurance, produced by insurance nonprofits LIMRA and Life Happens, indicate a substantial disparity in life insurance purchasing between women and men and perceptions surrounding these products. 

Society historically shut women out of their financial affairs. 

Women did not have the right to open a bank account in their name before the 1960s. Before the Equal Opportunity Credit Act of 1974, banks refused women credit simply for being unmarried. In cases where women were married, banks required the co-signature of the husband. Until the SCOTUS Kirchberg vs. Feenstra decision in 1981, state laws gave men unfettered control over their wives’ assets–even if these were obtained without combined marital resources. 

Women remain underserved by the life insurance industry. 

Over the past five years, the life insurance ownership rate for U.S. women declined 10 points to 47 percent, despite women voicing a greater concern regarding the “financial, physical and mental impact of COVID-19 on them and their families,” according to the report. Indeed, 31 percent of women said they would obtain life insurance coverage in 2021, with 42 percent of men saying they would do the same.  

Some women in the survey said they had anxiety about being dealt with differently by insurance companies and financial professionals and were uneasy about sharing personal information with an agent or company.  

Women still face hurdles to financial planning on equal terms. 

The LIMRA study posits that only 22 percent of women “feel very knowledgeable about life insurance,” compared to 39 percent of men, with 80 percent of women misjudging the cost of life insurance. Researchers found this “undermines women’s confidence in shopping for and purchasing coverage and leads to fear of being taken advantage of, creating a barrier to entry.” 

Data can play a crucial role in understanding how people make decisions, but it needs context. Other research, for example, indicates that societal norms and biases can affect women’s confidence and their propensity to engage in subjects from which they have been historically excluded. Vestiges of the past continue to sustain inequalities: 

• Biases about who is and who isn’t entitled to be confident about financial matters; 
• Gender pay gaps, with even larger disparities for women of color; and 
• Skewed distribution of unpaid – yet extremely valuable – family caregiving and household labor. 

When combined with the status of being an equal or primary earner for their household, these hurdles can be amplified as women may consequently have less time to devote to increasing their knowledge and use of financial planning tools, such as insurance. 

Barriers are falling, but there’s opportunity in doing more. 

Throughout history, women have played a significant role in the economy at large and within their families, regardless of whether their contributions were compensated or recognized. Today, lifestyle choices, a divorce, or the death of a partner may position nine out ten women as the sole financial decision-maker in their households. The 2021 Insurance Barometer Study, also conducted by Life Happens and LIMRA, found that 43 percent of women say they need or will need more coverage – a total of 56 million individuals.  

Market opportunity lies in engaging women where they are. Increasing consumer education and accommodating gender-diverse life cycle needs and the associated risks can make this happen. Women represent nearly 60 percent of insurance professionals, but only one in 10 hold leadership positions, roles that drive industry transformation. Pushing ahead with diversity and inclusion goals can lay the groundwork for more innovation and equality.  

Pandemic DrivesLife Insurance Sales, Especially AmongYoung Consumers

By Maria Sassian, Triple-I consultant

The COVID-19 pandemic contributed to a decrease in life expectancy in the United States for the first time in decades, according to the Centers for Disease Control and Prevention (CDC).  After climbing steadily for many years, life expectancy fell by 1.5 years from 2019 to 2020 – the largest one-year dip since World War II, when it declined by 2.9 years between 1942 and 1943.

Life expectancy at birth for the total population declined from 78.8 years in 2019 to 77.3 years in 2020.  The grim prospect of mortality, as well as the financial havoc wrought by the pandemic, has led many people to consider protecting their loved ones with life insurance.  

A survey by Life Happens and LIMRA published in April 2021 found that about 31 percent of consumers said they are more likely to buy life insurance because of the pandemic. And the latest data show they followed through on that intention. Total U.S. life insurance premium increased 21 percent in the second quarter 2021, the largest year-over-year increase since third quarter 1987. For the first half of 2021, total premium increased 18 percent, compared with the first six months of 2020, LIMRA reports.

Life insurance is now attracting younger customers. LIMRA’s survey shows that 45 percent of millennials said they are more likely to buy life insurance because of COVID-19.  This increased interest could be explained by the fact that younger people are more likely to have children who are minors and higher amounts of outstanding mortgage debt to cover if they died.  Younger workers also faced higher unemployment rates throughout the pandemic compared to older workers, so they may have purchased individual coverage to make up for the loss of employer-sponsored policies.

Decisions about buying a policy or increasing coverage also vary by race. Deloitte research found that underinsured Hispanic/Latino buyers were most interested in increasing life insurance coverage as a response to the pandemic, followed most closely by Black buyers. Deloitte speculates that this is due to the higher unemployment rates among Black and Hispanic/Latino people during the pandemic, which resulted in the loss of employer-sponsored life coverage. Overall, Black and Hispanic/Latino people were disproportionately affected by COVID-19.

September is Life Insurance Awareness month, and now turns out to be a good time to get the coverage. Insurers have made it easier to buy policies during the pandemic. Many companies are temporarily waving in-person medical exams and streamlining the buying process with simplified underwriting.

Companies with the strongest digital capabilities are benefitting from a 30 percent to 50 percent increase in online life insurance sales since January 2020, according to Deloitte.  Consumers like shopping online, and interest in agent-driven sales is decreasing, with just 41 percent of consumers saying they prefer to buy in-person in 2020 – down from 64 percent in 2011.

People who get life insurance don’t tend to regret it. In fact, LIMRA reports that that almost 40 percent said they wished they had purchased it at a younger age. And while many people believe life insurance is too expensive, most overestimate the cost. LIMRA found that 44 percent of Millennials thought the cost of  term life insurance was more than $1,000 a year, when it’s closer to $160 for a healthy 30-year-old to own a $250,000 level term life insurance policy.

Related links:
Triple-I’s Life Insurance Basics
Facts & Statistics: Life insurance

Can Life Insurers Cover All COVID-19 Death Claims?

Will life  insurers be able
to  pay all the death claims attributable
to COVID-19 that come on top of claims for deaths not directly related to the
pandemic?

Triple-I chief economist Dr. Steven
Weisbart says they can.

How many additional death claims will COVID-19 cause?

As of this writing, officially about 90,000 Americans have died
from COVID-19. In addition, there have been other deaths that seem excessive
relative to “normal” statistics in prior years, suggesting the COVID-19 numbers
are an undercount. It’s also
possible that the “lockdown” imposed nearly nationally in late March,
April, and in part of May, added to the total through suicide, drug overdoses,
untreated conditions that would have been treated and managed in the absence of
the pandemic, and violence.

So,
let’s assume that, for the full year 2020, COVID-19 and related stresses cause
300,000 additional deaths. For simplicity, we’ll ignore any lockdown-related reductions
in deaths – from, for example, fewer traffic accidents, air pollution, and
other causes – that might be attributed to the pandemic.

“It’s
unlikely that all the people who’ve died from COVID-19 had individual life
insurance, since many were age 60 or over,” Weisbart says. “Even if we assume a
third of these were insured – and, further, that two-thirds of younger people
who died also had life insurance – and that all these claims were in addition
to other causes of death, that would be 150,000 claims.”

In 2018, the latest year for which we have data, beneficiaries
under 2.7 million individual life insurance policies received death benefits.
So, although 150,000 additional death claims represent a large human toll, they
would be only a 5.6 percent increase over the 2.7 million baseline.

“That would result in total death benefits being paid to 2.85
million beneficiaries,” Weisbart says. “This is roughly the same as occurred in
2015 and well below the peak of 3.5 million in 2012.”

In other words, even with our conservative assumptions, paying the
additional deaths claims due to the pandemic is well within the industry’s financial
and operational ability.

Can Life Insurers Cover All COVID-19 Death Claims?

Will life  insurers be able
to  pay all the death claims attributable
to COVID-19 that come on top of claims for deaths not directly related to the
pandemic?

Triple-I chief economist Dr. Steven
Weisbart says they can.

How many additional death claims will COVID-19 cause?

As of this writing, officially about 90,000 Americans have died
from COVID-19. In addition, there have been other deaths that seem excessive
relative to “normal” statistics in prior years, suggesting the COVID-19 numbers
are an undercount. It’s also
possible that the “lockdown” imposed nearly nationally in late March,
April, and in part of May, added to the total through suicide, drug overdoses,
untreated conditions that would have been treated and managed in the absence of
the pandemic, and violence.

So,
let’s assume that, for the full year 2020, COVID-19 and related stresses cause
300,000 additional deaths. For simplicity, we’ll ignore any lockdown-related reductions
in deaths – from, for example, fewer traffic accidents, air pollution, and
other causes – that might be attributed to the pandemic.

“It’s
unlikely that all the people who’ve died from COVID-19 had individual life
insurance, since many were age 60 or over,” Weisbart says. “Even if we assume a
third of these were insured – and, further, that two-thirds of younger people
who died also had life insurance – and that all these claims were in addition
to other causes of death, that would be 150,000 claims.”

In 2018, the latest year for which we have data, beneficiaries
under 2.7 million individual life insurance policies received death benefits.
So, although 150,000 additional death claims represent a large human toll, they
would be only a 5.6 percent increase over the 2.7 million baseline.

“That would result in total death benefits being paid to 2.85
million beneficiaries,” Weisbart says. “This is roughly the same as occurred in
2015 and well below the peak of 3.5 million in 2012.”

In other words, even with our conservative assumptions, paying the
additional deaths claims due to the pandemic is well within the industry’s financial
and operational ability.

Are Life Insurers Writing Less Business Because of COVID-19?

COVID-19 has changed many aspects of our lives, so it isn’t surprising
to see life insurance markets affected. But some stories create false impressions
that should be corrected.

The story that some life insurers are writing fewer policies “because of COVID-19” has gained traction in both traditional and social media. While not wrong, like other stories involving insurance and COVID-19, it requires context to keep it from wandering off into urban legend territory.

“Life insurers’ ability to keep their promises to policyholders
depends on numerous factors,” explains Triple-I chief economist Dr. Steven
Weisbart.  “Among them are interest
rates and how responsibly insurers underwrite policies and manage their
investments.”

Interest rates exceptionally low

What do interest rates have to do with life insurance? Many
products (whole and
universal life and term life for 20 years
or more) calculate premiums in the expectation that, during the life of the
policy, the insurer will earn enough interest from its investments, net of
investment expenses and taxes, to help pay life insurance benefits. Many life
insurance and annuity policies – especially those issued 10 or more years ago –
guarantee to credit at least 3 percent per year.

“Efforts to stave off the recession spurred by attempts to ‘flatten
the curve’ of infections and deaths caused by the virus have led to
historically low interest rates,” Weisbart says.

Gross long-term rates on the investment-grade corporate bonds life
insurers primarily invest in had been 4 percent for most of the past decade and
plunged below 3 percent in August 2019. Since the onset of the pandemic, rates
have fallen even further (see chart).

“So, life insurers – who planned to profit from the ‘spread’
between the interest they earned on their investments and the interest they
credited on their policies – have lately struggled as this spread disappeared
and then reversed,” Weisbart says.

Options are limited

“So, that’s it!” I hear some of you say. “It’s all about rich
insurance companies protecting their profits!”

Businesses must make a profit to stay alive, and U.S. insurers – one
of the most heavily regulated and closely scrutinized businesses on the planet
– have the additional requirement to maintain substantial policyholder
surplus to ensure claims can be paid. Life insurers, in particular, are
required to maintain a special account – the interest maintenance reserve
(IMR).

“The IMR is drawn down when net interest earnings are too low to
support claims – as is the case now,” Weisbart says. “If it’s exhausted, insurers
can draw down surplus, but they can’t draw too much because they’re required to
keep at least a minimum surplus to protect against adverse outcomes in all
other lines of business.”

If their investments aren’t performing as well as expected,
insurers have two options: write less business or charge more for the business
they write.

Exercising a combination of these options is what life insurers
are doing now.

“When interest rates eventually rise, the profitable spread will
return,” Weisbart says, and competition among insurers will likely lead to more
liberal underwriting and lower premiums. “But we can’t predict with confidence
when that might happen.”

Until then, life insurers are tightening their criteria for issuing new policies and, in some cases, raising premiums so they can deliver what they’ve promised their existing policyholders.

Are Life Insurers Writing Less Business Because of COVID-19?

COVID-19 has changed many aspects of our lives, so it isn’t surprising
to see life insurance markets affected. But some stories create false impressions
that should be corrected.

The story that some life insurers are writing fewer policies “because of COVID-19” has gained traction in both traditional and social media. While not wrong, like other stories involving insurance and COVID-19, it requires context to keep it from wandering off into urban legend territory.

“Life insurers’ ability to keep their promises to policyholders
depends on numerous factors,” explains Triple-I chief economist Dr. Steven
Weisbart.  “Among them are interest
rates and how responsibly insurers underwrite policies and manage their
investments.”

Interest rates exceptionally low

What do interest rates have to do with life insurance? Many
products (whole and
universal life and term life for 20 years
or more) calculate premiums in the expectation that, during the life of the
policy, the insurer will earn enough interest from its investments, net of
investment expenses and taxes, to help pay life insurance benefits. Many life
insurance and annuity policies – especially those issued 10 or more years ago –
guarantee to credit at least 3 percent per year.

“Efforts to stave off the recession spurred by attempts to ‘flatten
the curve’ of infections and deaths caused by the virus have led to
historically low interest rates,” Weisbart says.

Gross long-term rates on the investment-grade corporate bonds life
insurers primarily invest in had been 4 percent for most of the past decade and
plunged below 3 percent in August 2019. Since the onset of the pandemic, rates
have fallen even further (see chart).

“So, life insurers – who planned to profit from the ‘spread’
between the interest they earned on their investments and the interest they
credited on their policies – have lately struggled as this spread disappeared
and then reversed,” Weisbart says.

Options are limited

“So, that’s it!” I hear some of you say. “It’s all about rich
insurance companies protecting their profits!”

Businesses must make a profit to stay alive, and U.S. insurers – one
of the most heavily regulated and closely scrutinized businesses on the planet
– have the additional requirement to maintain substantial policyholder
surplus to ensure claims can be paid. Life insurers, in particular, are
required to maintain a special account – the interest maintenance reserve
(IMR).

“The IMR is drawn down when net interest earnings are too low to
support claims – as is the case now,” Weisbart says. “If it’s exhausted, insurers
can draw down surplus, but they can’t draw too much because they’re required to
keep at least a minimum surplus to protect against adverse outcomes in all
other lines of business.”

If their investments aren’t performing as well as expected,
insurers have two options: write less business or charge more for the business
they write.

Exercising a combination of these options is what life insurers
are doing now.

“When interest rates eventually rise, the profitable spread will
return,” Weisbart says, and competition among insurers will likely lead to more
liberal underwriting and lower premiums. “But we can’t predict with confidence
when that might happen.”

Until then, life insurers are tightening their criteria for issuing new policies and, in some cases, raising premiums so they can deliver what they’ve promised their existing policyholders.

Are Life Insurers Denying Benefits for Deaths Related to COVID-19?

Social media has been abuzz with posts suggesting life insurance claims related to COVID-19 are being summarily denied. Much of the anxiety seems to stem from a news story titled: Would my life insurance policy cover COVID-19 related death?  

An anchor for the news organization that aired the piece shared it on Twitter below the tweet: 

Will your life insurance cover you if you die from #COVID19? 

Well, it depends. 

The tweet is accurate enough. As it would be if the reference to COVID-19 was deleted. Or if the tweet referred to another form of insurance. 

Claims sometimes are denied.  

According to the American Council of Life Insurers 2019  Fact Book, life insurance death benefits paid in 2018 totaled nearly $80 billion, up from $77 billion in 2017. Steadily rising annual payouts like the ones shown in the chart below don’t suggest an industry that spends a great deal of time slithering through loopholes to avoid paying legitimate claims.  

“Life insurance claims are rarely denied,” says Triple-I chief economist Dr. Steven Weisbart. “When they are, it’s typically because the policies had lapsed due to non-payment of premium or the policyholders had provided inaccurate or misleading information at the time of application or renewal.” 

Even in the event of a material misstatement on a life insurance application – say, the applicant lied about a significant health issue – the insurer has to discover the misrepresentation within a defined “contestability period.”  

If the policyholder dies within that period, which typically lasts two years from the date of purchase, Dr. Weisbart says, the insurer can investigate whether the information the applicant provided was accurate. If the policyholder dies after the contestability period ends, the insurer is out of luck.    

Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and making customers happy enough to recommend them to friends and family. 

Compare the chart above, showing the billions of dollars in death benefits paid, with the chart below showing that contested claims are only a tiny fraction of those paid – and bear in mind that many, if not most, of those contested claims ultimately ended up being paid.

Regulated and closely watched 

Insurance is one of the most heavily regulated and closely scrutinized industries in the world, and claims payment is at the heart of the insurance customer experience. Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and – as with any other business – making customers happy enough to recommend them to their friends and family. 

Unfortunately, many people – including much of the media – simply don’t understand how insurance works: how premiums are set, what types of risks are excluded (or that exclusions are even “a thing”), and how reserves and policyholder surplus work.  

This is demonstrated in some of the contentious discussions around COVID-19-related business interruption claims. In the case of business interruption, most of the denied claims have been against policies that specifically exclude losses related to infectious disease. Moves are now afoot to retroactively rewrite those contracts – to the immediate detriment of the insurance industry and longer-term danger to the people and businesses that depend on insurance – as well as anyone who ever enters into any contract ever again.  

I know of no life insurance policy that specifically excludes death from infectious disease. It’s possible some “dread disease” policies that cover specific conditions, such as cancer, might not be paid if COVID-19 – rather than the disease insured against – is deemed to be the cause of death. Or that a life claim might be denied if premium payments were missed or a policyholder smoked or engaged in some other activity associated with high coronavirus mortality that they’d denied on their application less than two years earlier.  

So, yes: Some claims may be denied. But such denials are rare and – social media agitation notwithstanding – don’t imply nefarious behavior on the part of insurers.  

Financial First Responders 

As the economic impact of the pandemic makes it difficult for consumers to keep current on their bills, states have begun to mandate that life insurers keep policies in force, even if policyholders miss payments. At the same time, insurers – facing big financial hits across the many categories of risk they cover (including recent tornadoes and the upcoming hurricane and wildfire seasons) – are doing a lot to support their customers and the communities in which they do business during this crisis. 

Insurers are financial first responders when it comes to just about any loss-creating event the average person might imagine. Media organizations would do their consumers a greater service by clarifying that role and helping them understand how best to shop for the insurance they need than by dropping scary, misleading tweets on an already anxiety-filled public.

Are Life Insurers Denying Benefits for Deaths Related to COVID-19?

Social media has been abuzz with posts suggesting life insurance claims related to COVID-19 are being summarily denied. Much of the anxiety seems to stem from a news story titled: Would my life insurance policy cover COVID-19 related death?  

An anchor for the news organization that aired the piece shared it on Twitter below the tweet: 

Will your life insurance cover you if you die from #COVID19? 

Well, it depends. 

The tweet is accurate enough. As it would be if the reference to COVID-19 was deleted. Or if the tweet referred to another form of insurance. 

Claims sometimes are denied.  

According to the American Council of Life Insurers 2019  Fact Book, life insurance death benefits paid in 2018 totaled nearly $80 billion, up from $77 billion in 2017. Steadily rising annual payouts like the ones shown in the chart below don’t suggest an industry that spends a great deal of time slithering through loopholes to avoid paying legitimate claims.  

“Life insurance claims are rarely denied,” says Triple-I chief economist Dr. Steven Weisbart. “When they are, it’s typically because the policies had lapsed due to non-payment of premium or the policyholders had provided inaccurate or misleading information at the time of application or renewal.” 

Even in the event of a material misstatement on a life insurance application – say, the applicant lied about a significant health issue – the insurer has to discover the misrepresentation within a defined “contestability period.”  

If the policyholder dies within that period, which typically lasts two years from the date of purchase, Dr. Weisbart says, the insurer can investigate whether the information the applicant provided was accurate. If the policyholder dies after the contestability period ends, the insurer is out of luck.    

Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and making customers happy enough to recommend them to friends and family. 

Compare the chart above, showing the billions of dollars in death benefits paid, with the chart below showing that contested claims are only a tiny fraction of those paid – and bear in mind that many, if not most, of those contested claims ultimately ended up being paid.

Regulated and closely watched 

Insurance is one of the most heavily regulated and closely scrutinized industries in the world, and claims payment is at the heart of the insurance customer experience. Insurers don’t make money by rejecting claims. They make money by underwriting accurately, investing wisely, and – as with any other business – making customers happy enough to recommend them to their friends and family. 

Unfortunately, many people – including much of the media – simply don’t understand how insurance works: how premiums are set, what types of risks are excluded (or that exclusions are even “a thing”), and how reserves and policyholder surplus work.  

This is demonstrated in some of the contentious discussions around COVID-19-related business interruption claims. In the case of business interruption, most of the denied claims have been against policies that specifically exclude losses related to infectious disease. Moves are now afoot to retroactively rewrite those contracts – to the immediate detriment of the insurance industry and longer-term danger to the people and businesses that depend on insurance – as well as anyone who ever enters into any contract ever again.  

I know of no life insurance policy that specifically excludes death from infectious disease. It’s possible some “dread disease” policies that cover specific conditions, such as cancer, might not be paid if COVID-19 – rather than the disease insured against – is deemed to be the cause of death. Or that a life claim might be denied if premium payments were missed or a policyholder smoked or engaged in some other activity associated with high coronavirus mortality that they’d denied on their application less than two years earlier.  

So, yes: Some claims may be denied. But such denials are rare and – social media agitation notwithstanding – don’t imply nefarious behavior on the part of insurers.  

Financial First Responders 

As the economic impact of the pandemic makes it difficult for consumers to keep current on their bills, states have begun to mandate that life insurers keep policies in force, even if policyholders miss payments. At the same time, insurers – facing big financial hits across the many categories of risk they cover (including recent tornadoes and the upcoming hurricane and wildfire seasons) – are doing a lot to support their customers and the communities in which they do business during this crisis. 

Insurers are financial first responders when it comes to just about any loss-creating event the average person might imagine. Media organizations would do their consumers a greater service by clarifying that role and helping them understand how best to shop for the insurance they need than by dropping scary, misleading tweets on an already anxiety-filled public.

Coronavirus wrap-up: life and health insurance (4/22/2020)

Health insurance

Buying
health insurance? What to know during the coronavirus pandemic

Care
providers may need $100B more as industry faces further COVID-19 losses

What
to Do if You Can’t Pay for Insurance Due to Coronavirus

Health
Insurance Rates Could Be Weirdly Stable: Actuaries

How
Will COVID-19 Affect the Health Care Economy?

Life insurance

Certain
US life insurers suspend senior applications

Consumers
Looking To Buy Life Insurance

More
States Mandating Forgiveness On Life Insurance Premiums

Implications
of coronavirus for North American life and annuities writers

What
an Annuity Giant Is Telling Investors About COVID-19 Risk