COVID-19: opportunities for the U.S. individual life insurance industry
by Varun Sood Do you think we are ever going do a handshake again? Or will we celebrate by blowing candles on a birthday cake? These common and universal practices might simply disappear from popular culture, never to be experienced again. These are just some simple examples of how COVID-19 will permanently alter social cultures and business practices. The COVID-19 pandemic has already had a significant impact on almost every industry. While most of the sectors have been affected negatively, a few have seen a positive effect too. With millions of people infected across the globe, individual life insurance is one product which is directly related to the pandemic and is likely to have a major effect. The looming economic recession has forced every industry, including individual life insurance, to look for innovative ways of dealing with it. The way the pandemic scenario has been rapidly evolving, the changes in industry practices are going to be at a pace faster than ever witnessed before. As per a recent LIMRA study based on the last 50 years data, individual life insurance policy sales have typically shown a decline during or immediately after a recession, but there have been exceptions driven by unique customer behavior like the recession in the early 1980’s when policyholders were replacing whole life insurance with universal life insurance in order to take advantage of the then highinterest rates.1 The impending severe economic downturn also has a unique characteristic that it is resulting from the fear of ill-health and death. There are some early signs that the fear of coronavirus is driving people’s interest in individual life insurance. The life insurance industry is expecting that this new concern about health threats as well as the increased adoption of the internet to access financial service will help them turn a negative scenario into an opportunity.
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Intelligent Risk - July 2020
