Outlook for life insurance in 2024
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“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Published 5:00 a.m. UTC Nov. 16, 2023
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Key points
- Buying life insurance will get easier for many buyers as technology, including AI, expedites the underwriting process.
- Life insurance companies will continue efforts to decrease the coverage need gap.
- Younger consumers may see more products and processes geared toward their purchasing preferences.
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Technology will continue to improve and expedite access to life insurance
Life insurance is becoming easier to buy, a welcome shift for many consumers previously put off by lengthy underwriting periods or required in-person medical exams.
Though there are instances where a traditional underwriting process may be required, more and more companies are switching to automated or accelerated underwriting.
This transition is in large part due to technological advances that make it easier for life insurance companies to assess risk without the need for medical exams or lengthy underwriting processes. Instead, accelerated underwriting allows insurers to leverage constantly improving algorithms and third-party data, such as digital health records, when assessing risk and determining eligibility and premiums.
Catherine Theroux, the director of public relations for LIMRA, highlighted the magnitude of this shift, noting that the underwriting period can drop from an average of 25 days (or longer) to an average of five days when accelerated or automated methods are used. Many insurers even offer instant or same-day coverage to eligible applicants.
Accelerated underwriting isn’t new, but its presence has increased significantly. Theroux noted that about 62% of companies used automated or accelerated underwriting prior to the pandemic, but by 2021, that number increased to more than 90%. There’s every expectation that it will continue to rise as we leave 2023 in the rearview.
In part, this shift was a product of a necessity — the pandemic left many applicants unable or unwilling to undergo the traditional underwriting process, but the shift also comes as insurers see proven value in digital tools.
“As time goes on, [insurers] have been able to refine the process and be more confident in their ability to use it.” Theroux added that companies have also “expanded the breadth of coverage,” noting that at one time, life insurance companies may have limited accelerated underwriting products to lower coverage amounts, such as $500,000, whereas today some are offering policies with as much as $10 million in coverage.
Tim Heslin, president of life insurance at Corebridge Financial and a member of LIMRA’s Life Insurance Advisory Board also sees technology and its impact on the life insurance industry as one of the biggest and most exciting trends we can expect in 2024.
“Across the industry, insurers are making that application process simpler, quicker, more intuitive, more flexible, just overall more contemporary,” he said.
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Insurers will try to reduce the coverage gap amid inflation
“Like years past, in 2024 and beyond, the life insurance industry will continue to seek ways to educate and reach the 100 million American adults who are either uninsured or underinsured, per findings from [LIMRA],” said Paul Dougherty, board member of Life Happens, a nonprofit group aimed at providing consumers with unbiased life insurance information.
According to the 2023 Life Insurance Barometer, an annual life insurance survey conducted by LIMRA and Life Happens, the need gap continues to be a pain point for insurers as well as consumers who miss out on the financial protection life insurance provides.
Before the pandemic, 34% of survey respondents reported that they didn’t have life insurance or felt they didn’t have enough coverage. That number rose to 41% by 2022 and held steady in 2023. Among respondents who most frequently expressed a life insurance need are:
- Women (44%).
- Millennials (47%) and Gen Z (49%).
- Those who identify as Black (49%) or Hispanic (49%).
- Households with less than $50k in annual income (56%).
Bridging this need gap may prove difficult in 2024. Cost is one of the leading reasons people report not having or not having enough life insurance coverage, yet more than half (55%) of those surveyed overestimate the cost of life insurance.
Even though a healthy 30-year-old would pay less than $200 annually (on average) for a $250,000, 20-year life insurance policy, more than half of survey respondents believed it would cost $500 or more a year.
That can pose a problem in 2024 as consumers cope with inflation and thinning budgets.
“We’re seeing budget as a challenge for consumers,” said Doughtery. “While there is always an appetite for the need to protect what’s important, consumers are experiencing inflation in every part of their budget, so finding space for life insurance can be challenging.”
Scott L. Goldberg, president of the consumer division of CNO Financial Group, Inc., also sees inflation as being a major challenge in the coming year, and not just when it comes to room for life insurance premiums in the budget.
“With rising prices for consumer goods and services, middle-income consumers will likely be challenged to find the discretionary funds necessary to pay for life insurance premiums. Moreover, as consumers worry about the economy and rising day-to-day expenses, some will likely put off buying a home, due to rapidly rising home prices and very high mortgage rates. Home purchases are a common driver of life insurance purchases.”
The onus of bridging the gap and helping consumers see the real cost of coverage (and perhaps the risk of not carrying it) will fall to insurers.
“People are experiencing cost increases in every aspect of life,” said Doughtery, “So the need to educate consumers on the importance of life insurance will continue to be critical.”
Goldberg lent further insight into the challenges insurers may face as they try to reach customers. “Developing and implementing technology innovations and attracting, hiring and retaining employees that have the skill sets to design new products and to support the business from a technical standpoint are some of the biggest challenges [for insurers].”
Insurers look to innovative ways to reach younger consumers
Younger consumers represent not only a sizable portion of the life insurance need gap but also a shifting demographic that has different expectations for the buying experience — inside and outside of life insurance. Many, especially millennials and older Gen-Zers, are also at a prime time to buy.
“We know life insurance is resonating with Gen Z, millennials,” said Heslin, pointing out that many of those generations are entering into what he referred to as the “classic life insurance purchasing years,” as they get married, buy homes and have children.
“So now our industry needs to adapt the purchasing process for what these younger generations expect.”
For Heslin, one way to meet that need is to provide flexibility based on the buyer as opposed to a single approach to the buying process. For instance, he pointed to the new Corebridge Financial end-to-end platform that allows agents to leverage application processes that cater to each applicant’s unique needs instead of using a one-size-fits-all approach.
Theroux echoed this notion and again pointed to data from the 2023 Life Insurance Barometer that shows what younger customers are looking for.
When asked what type of life insurance product survey respondents said they’d be interested in, Gen Z and millennials were likely to show interest in coverage that:
- Provides guaranteed retirement income (49% of Gen Z, 56% of millennials).
- Provides wellness programs and incentives (28% of Gen Z, 30% of millennials).
- Is bundled with a property and casualty policy (29% of Gen Z, 27% of millennials).
- Is bundled with a mortgage (25% of Gen Z, 24% of millennials).
- Provides immediate short-term coverage (20% of Gen Z, 17% millennials).
Theroux pointed to embedded products as a way to potentially draw in younger generations who want a simple, more robust life insurance product. Embedded products may mean bundling home and auto insurance, long-term care coverage or financial services with life insurance policies.
It may also be offering other services, like those that focus on wellness.
Some insurers, like John Hancock and MassMutual, are already exploring this opportunity. “John Hancock and MassMutual have programs in place called Vitality and Genomics, respectively. Insurers are working harder to keep people healthier, and they’re experimenting with different ways to do it,” said Theorux, adding that it’s still an emerging trend.
Social media will take main stage for younger shoppers
As older generations become less of the market share for new policies, insurers will need to look to new avenues to attract young buyers. For Gen Z and millennials, there’s no better stage than social media.
“Consumers will increasingly turn to social media platforms for their financial tips and tricks, with younger generations continuing to lead the trend,” said Doughtery.
“After all, half of Gen Z sought information about life insurance online, according to the 2023 Insurance Barometer study conducted by Life Happens and LIMRA,” she added.
“What’s more, 68% of millennials and 47% of Gen Z go to Facebook for financial information, while 64% of millennials and 70% of Gen Z turn to YouTube.
AI will improve the purchasing and underwriting process
Artificial intelligence (AI) is a technological advancement that’s claimed headlines all year and will no doubt monopolize its fair share of news coverage in 2024.
Heslin sees AI as being a huge advancement for the life insurance industry, primarily in one of the most complex aspects of the life insurance process: underwriting.
“I expect artificial intelligence to be used as an underwriting tool. We pull together and analyze a lot of data as part of our underwriting process. And I expect AI to be very helpful there. Life insurance needs to get quicker, simpler and more contemporary. My expectation is that’s where AI is going to help,” said Heslin.
How to find the best life insurance company in 2024
Life insurance plays an important role in financial planning, especially if you have a loved one who depends on your income. Here are some tips to help you find the best life insurance in 2024.
- Determine how much coverage you need. There are a lot of life insurance policies available, with coverage limits that range from $10,000 to $10 million or more. Deciding how much life insurance you need can help you choose an insurer and life insurance product. Take into account:
- Your income and how many years you want it replaced for dependents.
- Debts, such as a mortgage balance.
- Educational expenses you want to be covered for dependents, such as college tuition.
If you’re not sure how much you need, consider using the Life Happens life insurance calculator.
- Decide how long you need coverage. Do you want coverage that lasts a certain number of years, such as until your mortgage is paid off or your children reach adulthood? Or are you looking for a policy that lasts a lifetime?
Permanent life insurance, such as whole life coverage, is a good option if you want a policy that lasts until death or at least an advanced age, such as 98 or 100.
Term life insurance is generally the most affordable choice if you only want coverage for a specific period, such as 20 or 30 years. It’s also a good option if you have an existing life insurance policy but want additional coverage after a life change or milestone, such as buying a home or having a baby.
- Shop around and compare quotes and policies. Get at least three life insurance quotes for the same type and amount of coverage before you choose.
Getting multiple quotes can also help you find the cheapest life insurance, making it a wise move for your wallet as well.
- Research and review companies. Check out online ratings and rankings from financial and life insurance experts, read company reviews and talk with friends and family to get feedback on their experiences with a particular life insurance company.
Credit rating agencies like AM Best, Moody’s and Standard & Poor’s (S&P) issue financial strength grades for companies that are worth checking. These ratings reflect a company’s ability to pay out claims, with A ratings indicating a strong likelihood of payment.
- Consider working with a financial advisor. There are a lot of life insurance products available, but some may be better suited for you than others. Sifting through them can be complicated.
Heslin recommends working with a financial professional who can help you choose the best product. This is especially true if you’re considering more complex life insurance products, such as indexed universal or variable universal life insurance.
Life insurance ratings
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