Life premium expected to maintain record levels through 2024

Enough positive variables are in play for LIMRA analysts to project record-level life insurance premium through 2024. Specifically, December 2020 changes to the IRS tax code criteria that cash value life insurance policies must meet to retain taxadvantaged status.

Fueled by the COVID-19 pandemic, life insurance premium hit record highs in 2021. That strong growth continued in the first half of 2022, then tailed off, according to LIMRA’s U.S. Retail Individual Life Insurance Sales Summary for Fourth Quarter 2022. Life insurance premium totaled $15.3 billion in 2022, roughly level with 2021.

Whole life new premium dropped 19% in the fourth quarter of 2022, compared with results from the prior year. Fourth quarter of 2021 WL premium experienced the strongest quarterly premium growth for WL in 30 years. Term new premium growth fell 5% in the fourth quarter, year over year. In 2022, term new premium was $2.8 billion, 5% lower than the 2021 results.

Compared with the 29% premium growth for indexed universal life in the fourth quarter 2021, IUL new premium fell 5% in the fourth quarter 2022. For the year, IUL new premium totaled $3.9 billion, up 13% over 2021 results. IUL held 25% of the total individual life insurance market in 2022.

WHAT’S BEHIND THE DECLINE IN POLICY COUNTS?

Anyone connected to the life insurance industry knows that the number of Americans covered by life insurance has steadily declined for decades. The reasons behind that decline generated some sharp insights recently during a presentation at the National Association of Insurance Commissioners’ spring meeting.

The number of families reporting any life insurance coverage peaked at 85.4% in 1971. That number declined nearly every year since and is expected to decline in 2022 from 59.4% in 2021, said Andrew Melnyk, chief economist and vice president of research for ACLI.

The life insurance industry saw its second-largest increase in death benefits paid in 2020, Melnyk pointed out. The COVID-19 pandemic had an enormous impact on the industry. In fact, death benefits paid generally increased strongly throughout the history of life insurance in the United States, he added.