life insurance research

The future of life insurance: Reimagining the industry for the decade ahead

The future of life insurance

The global life insurance industry has seen significant changes over the past decade. Developing economies—predominantly emerging markets in Asia that were formerly small contributors—have become global growth drivers and now account for more than half of global premium growth (Exhibit 1) and 84 percent of individual annuities growth (Exhibit 2). The availability of data has skyrocketed, and insurers have made progress in advanced analytics and artificial intelligence. Digital and mobile advances have raised the bar on transparency and service quality: customers can now file claims and access agents, insurance quotes, and policy information with a few taps on a screen.

The past decade has also introduced new challenges. Life insurers have not benefitted from the bull market (Exhibit 3). Global penetration fell to 3 percent, and premium growth within most developed markets, hovering just below 2 percent per year, struggled to match GDP. Globally depressed interest rates curtailed investment portfolio returns. More recently, the COVID-19 pandemic has depressed global interest rates even lower than those seen in the 2007–08 global financial crisis, leading to disproportional impact on life insurance stock relative to the rest of the market (Exhibit 4).

Meeting the moment across three key areas

Several trends show promise for the life insurance industry in the next decade. Customer demand is at an all-time high. Indeed, the COVID-19 pandemic has only reemphasized the need for mortality protection. Public pension replacement rates are declining and healthcare expenditures are rising—trends also accelerated by the COVID-19 crisis. Economic and demographic trends will also offer tailwinds. The global middle class is rapidly expanding, bringing higher incomes, growing financial wealth, and heightened risks to manage. By 2030, all baby boomers will be age 65 or older, 1 “Older People Projected to Outnumber Children for First Time in U.S. History,” US Census Bureau, March 13, 2018, census.gov. and many are expected to outlive their retirement savings. 2 Johnny Wood, “Retirees will outlive their savings by a decade,” World Economic Forum, June 13, 2019, weforum.org.

We believe the life insurance industry faces a pivotal, dual opportunity: the chance to fulfill growing customer needs while returning to profitability and growth. To achieve these goals, we expect winning life insurance companies to outperform in three areas in the decade ahead:

personalize every aspect of the customer experience
develop flexible product solutions suitable for a challenging regulatory and interest-rate environment
reinvent skills and capabilities

Personalize every aspect of the customer experience

The influence of digital leaders in other industries has raised the bar in insurance as well. Several areas offer opportunities for personalization that can strengthen customer relationships.

A shift to targeted health management. Life insurers have long maintained a focus on mortality protection, but concern over mortality risk has diminished in many markets, which has reduced demand for core products. Despite recent increases in online research for life insurance, spurred by COVID-19, the long-term decline of mortality risk is likely to continue. In the coming decade, insurers will play an increasingly prominent role in the health of their customers as life expectancy increases and health trends change.

By 2030, the number of people aged 60 and older will grow by more than 50 percent, from 900 million in 2015 to 1.4 billion. 3 World Population Ageing 2015: Highlights, United Nations, Department of Economic and Social Affairs, Population Division, 2015, un.org. Further, noncommunicable diseases—those more closely linked to lifestyle and behavior, such as diabetes, heart disease, and lung cancer—will account for 71 percent of all annual deaths globally and represent an increasing proportion of mortality risk. 4 “Noncommunicable diseases,” World Health Organization, June 1, 2018, who.int. We believe these factors will motivate life and annuities manufacturers to engage customers in the shared-value economics of healthy living to increase policyholder longevity.

Technology will play an important part in this transition. The proliferation of data and connected devices, particularly wearables, will continue to make it easier for life insurance companies to play an active role in shaping customer health—to everyone’s benefit. Armed with this information, life insurance companies can provide well-timed, personalized reminders or notifications around diet, disease management, doctor appointments, local health resources, and physical activity. Customers are increasingly willing to share their data in exchange for personalization; today, six in ten consumers globally are comfortable sharing personal details with their insurer in exchange for lower premiums . 5 2020 DXC insurance survey report: The voice of the US customer, dxc.technology.

This trend has accelerated during the pandemic. Evidence shows that a higher proportion of consumers are willing to share data collected on their watches related to heart rate. In recent months, life insurance companies have relied on more detailed questions and medical records instead of in-person physical exams, which have not been possible with physical distancing.

Shared-value life insurance products, such as Vitality, are in the vanguard. Developed by Discovery Group in South Africa, Vitality pioneered the model of shared-value economics in its product design and pricing, leading to the creation of an engaged wellness ecosystem. Now in 22 markets, the program has seen a 35 percent reduction in mortality among highly engaged members and a 15 percent lower policy-lapse rate. 6 Integrated Annual Report 2019, Discovery, 2019, discovery.co.za. In addition, some Japanese life insurance companies are migrating to a “pay as you live” premium schedule with dynamic pricing. For example, customers who exhibit regular healthy behaviors, such as exercising and attending doctor checkups, are rewarded with lower premiums. In the future, we expect to see life insurance transition from the traditional “assess and service” model and shift toward “prescribe and prevent” (Exhibit 5).

Continuous underwriting. The evolution toward continuous underwriting, made possible by increased data and device connectivity, will present further opportunity for personalization. Currently, mortality underwriting suffers from two primary data gaps. First, it is constrained to a single moment in time—the initial sale. The only data available at that point are past morbidity and behavioral data on the customer. Second, it fails to account for a customer’s lifestyle changes, which are significantly more controllable.

We envision underwriting evolving in four phases that will increase personalization and customer engagement (Exhibit 6). Currently, insurers focus on automating the underwriting process to improve efficiency gains and reduce inconsistencies (phase 1). Some insurers have advanced to accelerated underwriting, for which applications are submitted digitally (phase 2). Doing so dramatically reduces the need for invasive fluid and paramedical exams and results in near auto-issuance for the majority of policies. Insurers will then graduate to microsegmentation and personalization, for which individualized offers are generated using comprehensive internal and external data sets with enhanced accuracy (phase 3). Finally, winning companies will provide continuous “one-touch” underwriting, with dynamic adjustment based on customer behavior and suggested personalized actions to significantly drive healthier behavior (phase 4). Together, this four-phase evolution flips the underwriting approach on its head, with environment, health, and lifestyle becoming primary inputs and medical data providing only one part of the picture (Exhibit 7).

Personalized, omnichannel customer journeys. COVID-19 has accelerated many of the digital and omnichannel elements that were in their early stages. According to our research, more than 90 percent of new business in China historically has been generated through face-to-face interactions. Since the onset of the pandemic, insurance companies have been forced to adopt digital-hybrid solutions by incorporating robo-advisors, video conferencing, and web chats. Moreover, a recent McKinsey survey of European consumers found that 54 percent of customers now prefer direct or digital channels, up from 38 percent before the crisis.

Frontline professionals will continue to play a critical role in reaching customers, so insurers must embrace the integration of physical and digital channels once the crisis subsides. Life insurance companies can direct leads to the channel or agent that best serves each customer’s needs. Further, agents will be armed with advanced analytics on their customer base as well as centrally provided digital leads. Throughout the customer life cycle, life insurance companies will engage in multichannel, personalized customer interactions to promote cross-selling (by identifying the most likely “next product to buy”) and proactively reach out to customers who are likely to lapse. Such interactions have the ability to reduce customer acquisition costs by up to 50 percent, generate 5 to 10 percent of new premiums, and reduce customer churn by up to 30 percent.

Upgrading agent capabilities to more effectively use digital tools will be critical to the pending distribution shift. Indeed, a recent McKinsey survey found that “generating leads” and “building initial client relationships remotely” were the two biggest challenges faced by agents. At the same time, these agents were spending disproportionately more time on customer service and administration than before. Life insurance companies will have to significantly invest in digital infrastructure and place analytics at the core of distribution.

Develop flexible product solutions suitable for a challenging regulatory and interest-rate environment

Interest rates have been globally depressed for a decade—and even longer for some economies, such as Germany and Japan. Interest-rate pressure has increased further due to COVID-19, with few signs of abating. At the same time, changing regulations have limited traditional methods of doing business. The most successful life insurers will redouble their focus on innovation and flexibility.

A paradigm shift of the guaranteed product. Over the past five to seven years, some countries (such as France, Germany, the Netherlands, and Switzerland) saw new government bonds issued at negative yields. Meanwhile, others (such as the United States and Japan) continue to combat near zero interest rates. Indeed, according to the European Insurance and Occupational Pensions Authority, more than half of European life policies guarantee an investment return to policyholders that exceeds the yield on the local ten-year government bond. 7 IMF Blog, “European Life Insurers: Unsustainable Business Model,” blog entry by Reinout De Bock, Andrea Maechler, and Nobuyasu Sugimoto, May 5, 2015, blogs.imf.org.

New capital regulations accompanied the globally depressed rates. For example, the introduction of Solvency II in 2016 in the European Union increased capital requirements for traditional life and annuity products, putting further pressure on profitability. Consumers will continue to seek out guaranteed returns, which means many insurers will face challenges in offering guarantees in a capital-efficient, profitable manner. Collectively, traditional long-term, fixed-rate guaranteed products will undergo a paradigm shift in structure, from being rooted in guaranteed returns to offering upside potential with guaranteed downside protection.

Several life insurance companies have already begun moving their portfolios toward a wide variety of capital-markets products, specifically hybrids and unit-linked products, that are more capital efficient and perform well in a low-rate environment. From 2015 to 2019, unit-linked premiums rose $76 billion globally, with European life insurance companies accounting for two-thirds of global growth (Exhibit 8). Such products may offer customers upside potential coupled with downside protection (as high as 100 percent). That said, capital preservation is not free; whether in commissions, expense ratios, or yield, customers pay for it.

Regardless of interest-rate movement, previous fixed-rate guarantees, coupled with new regulations and customer education around alternatives, will likely keep life insurance companies focused on capital-light products in the decade ahead.

Tailor new solutions for different life stages. In the coming decade, the industry will see the emergence of new types of coverage, as well as increasing flexibility in product coverage and payment. Household debt is still more than 100 percent of net disposable income in most OECD countries, 8 “Household debt,” Organisation for Economic Co-operation and Development, 2020, data.oecd.org. divorce rates continue to rise, and job insecurity, spurred by technological advancements, can create uncertainty for consumers. Indeed, despite a decade of global economic growth, nearly 50 percent of consumers are somewhat or very concerned about job loss for themselves or a member of their household . New products that help allay those concerns, as well as increase coverage and premium flexibility, will likely prove increasingly popular with consumers.

Flexible offerings, which allow the consumer to adjust coverage throughout the life of the policy, have been met with favor in Japan. For example, a leading Japanese insurer offers medical, asset accumulation, and protection against dread disease and mortality wrapped into a single product, enabling the customer to add or reduce coverage as their circumstances change.

Value-added services and nonmonetary benefits. Over the next decade, product innovation will likely expand to adjacent services. Life insurance companies, which are competing with not only their peers but also industry alternatives such as pure wealth and asset managers, will increasingly seek to differentiate themselves through value-added services and nonmonetary benefits, particularly as life and health coverage continue to converge.

In Asia and Europe, life insurance companies are already offering administrative support for medical visits, health management, and telemedicine. Going forward, these companies could also partner with ridesharing companies and hotels to provide transportation to doctor visits or accommodations for loved ones in times of need.

Nonmonetary benefits can also address the risk needs of policyholders. For customers concerned with the cost of living in retirement, life insurance companies in Asia and the United Kingdom are replacing financial payouts with guaranteed placement in senior living communities.

Such services give insurers access to fee-based earnings, an alternative revenue stream that could be rewarded by investors. At the same time, fee-based earnings introduce more complexity vis- à -vis sales and after-sales support. Ultimately, earnings potential will be shaped by not only customer demand but also companies’ abilities to upskill distribution talent and develop unique economic solutions for distributors.

Reinvent skills and capabilities

The path to growth in the next decade will require new talent and bolder strategies. Life insurers must respond by capturing more value from existing assets and pursuing targeted M&A.

A radically different workforce, underpinned by skills of the future. By 2030, 44 percent of insurance work activities have the potential to be automated (Exhibit 9). Roles that focus on repetitive work and manual processes will cease to exist in their present form, while technology and digitally savvy workers will increase in value. Emotional, interpersonal, and social skills will also become more critical, especially for customer-facing agents who can help consumers address their changing financial and coverage needs. However, these workforce shifts will not eliminate jobs—our research indicates net new jobs will be created due to advances in automation—but instead change the nature of the work. The COVID-19 pandemic has only accelerated such trends.

In the war for digital talent, life insurance companies are at a disadvantage. The financial-services industry trails other sectors in volume of digital and tech talent. In fact, 80 percent of millennials say they have limited knowledge of the insurance industry, 9 Millennial generation attitudes about work and the insurance industry, a joint paper from The Institutes and Griffith Insurance Education Foundation, 2012, theinstitutes.org. a troubling sign for an industry in which 25 percent of employees believe themselves to be within five to ten years of retirement . However, COVID-19 and recent social unrest present an opportunity for life insurers to reframe their societal purpose, which may help recruit and retain exceptional talent.

Seventy-five percent of global executives agree that upskilling and reskilling employees must account for at least half of their skills gap solution. Life insurance companies that prioritize those efforts and develop operating models capable of responding to changing demands will distinguish themselves from peers and position themselves at the forefront of “future-proofing” their workforces.

Substantial value from in-force and closed blocks. Given global profitability challenges, insurers can increasingly optimize in-force and closed blocks as a source of value creation. Today, the attention given to in-force management is often not commensurate with its potential. Life insurance companies can enhance in-force value creation by executing across four pillars:

commercial effectiveness, including lapse management and cross-selling to policyholders
financial efficiencies, such as actuarial optimization and reinsurance
operational efficiencies, such as reduced administrative costs
transactions, such as partial or full sales of blocks of business

Companies can also extract value from closed blocks, which sometimes have unattractive product economics and operational difficulties or are misaligned with a company’s strategy. Yet given their cash flow potential, earnings, and embedded value, closed blocks deserve time, attention, and resources. Some insurers have helped fund investment in a digital transformation or an analytics road map by rationalizing their closed blocks of business.

By collaborating with actuaries and understanding the implications on the cost model, life insurance companies can often lock in savings and have a onetime release of reserves that is typically in the ten-to-one range (this ratio differs by company). In other words, for every $1 million saved in long-term in-force servicing costs on the closed block, there could be a $10 million onetime reserve release. Life insurance companies often use these funds to finance the transition of the closed blocks to a target platform, invest in digital and analytics, and wide-scale productivity transformations. The reserve can also be used in other ways to reduce the ongoing unit costs.

The prevalence of closed-block specialists will also spark increased sales by insurance companies beyond US and UK markets, where activity has been high. Specialists, whose scale facilitates lower costs per policy, have proven themselves to be effective operators. Moreover, closed-block sales can provide life insurance companies with immediate access to capital, derisked balance sheets, and a reduction in operational costs, such as legacy IT systems. But life insurance companies must remain open to exploring sales, and they can limit the risk of undervaluing their blocks by keeping an eye on the cost base, considering improvements, and structuring partnerships with potential buyers.

Precision M&A for expansion and capability building. Global M&A remained steady in the 2010s. The Americas accounted for 49 percent of deal volume by the end of the decade, followed by Europe at 32 percent. 10 Navigating a course between uncertainty and opportunity: Insurance growth report 2019, Clyde & Co, 2019, clydeco.com. Effective M&A—specifically as a vehicle for market expansion, capability building, and divesting noncore businesses—can continue to be a core strategy for successful life insurance companies.

Growth within existing markets will be challenging; life insurance companies can use acquisitions to enter new geographies, adjacencies, and products. Cross-border transactions can provide access to faster-growing developing markets, such as those in Latin America, and emerging markets in Asia. Moreover, the global middle class, projected to include six billion people by 2030, 11 Annual disposable income of $3,600 and over; World Population Prospects, United Nations, Department of Economic and Social Affairs, un.org; Cityscope by McKinsey Global Institute. will increasingly depend on robust wealth- and asset-management solutions, particularly in markets such as China, where the industry is evolving rapidly. Several life insurance companies have already expanded into such asset-management adjacencies, which have natural synergies with the industry’s core competencies. Others may find capital-light, fee-based businesses in areas related to other competencies to be more practical. Regardless, given the historically strong correlation between return on equity and price-to-book ratio, such investors reward higher return-on-equity businesses.

Life insurance companies can also rely on acquisitions for tech enablement and capability building. The past decade has witnessed the rise of insurtech, which attracted nearly $4 billion of global venture funding in 2018 alone. 12 Joanna Glasner, “A record $2.5B went to U.S. insurance startup deals last year, and big insurers are in all the way,” Crunchbase, April 4, 2019, crunchbase.com. Partially fueling the segment’s rise are the increasingly popular internal venture-capital funds launched by life insurance companies themselves. Such funds provide access to leading start-ups and serve as a natural “buy” versus “build” entry point for leading technologies. Insurtechs can also help companies increase their pace of innovation. The recent crisis has depressed valuations for start-ups, providing insurers an opportunity to acquire capabilities more cost effectively. As a result, life insurance companies can acquire their way to the forefront of disruptive innovation. If a full acquisition is not an option, hiring talent from insurtechs and other start-ups with greater digital and analytics capabilities is another possibility.

Finally, “shrink to grow” will likely prove a popular way for life insurance companies to launch their next growth S-curves. Divestitures of business lines or books of business, an increasingly popular trend at the end of the 2010s, can unlock capital to focus on new opportunities.

Download The future of life insurance: Reimagining the industry for the decade ahead , the full report on which this article is based (PDF–896KB).

Pierre-Ignace Bernard is a senior partner in McKinsey’s Paris office; Kweilin Ellingrud is a senior partner in the Minneapolis office; Jonathan Godsall is a partner in the New York office, where Andrew Reich is a consultant; and Bernhard Kotanko is a senior partner in the Hong Kong office.

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Facts + Statistics: Life insurance

In this facts + statistics, life insurance ownership, life/annuity sector, life/annuity insurance income statement, 2018-2022, premiums by line, direct premiums written by line, life/annuity insurance, 2020-2022, credit life insurance, credit life, and credit accident and health insurance direct premiums written, 2013-2022, investments, investments, life/annuity insurers, 2021-2023 (1), top 10 writers of life/annuity insurance by direct premiums written, 2023, top 10 writers of individual life insurance by direct premiums written, 2023, top 10 writers of group life insurance by direct premiums written, 2023, top 10 writers of life insurance deposit type contracts by direct premiums written, 2023, top 10 writers of life insurance other considerations by direct premiums written, 2023, top 10 writers of accident and health insurance by direct premiums written, 2023, distribution channels, online sales, other sales channels, separate accounts.

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According to the 2023 Insurance Barometer Study , conducted by LIMRA and Life Happens , a record-high proportion of consumers (39 percent) said they intend to purchase life insurance within the next year. The proportion is higher for Gen Z adults (44 percent) and millennials (50 percent). This year’s study looked at the growing market for life insurance market for single mothers . In looking at parents in general, the study found that parent of minor children were more likely to than the general population to own life insurance (59 percent versus 52 percent). The same group were also more likely to acknowledge they do not have enough coverage (47 percent versus 41 percent).

Traditional life insurance is no longer the primary business of many companies in the life insurance industry. The emphasis has shifted to underwriting annuities, which accounted for 48 percent of life/annuity direct premiums written in 2022. Annuities are contracts that accumulate funds or pay out a fixed or variable income stream. The income stream can be for a set period or over the lifetime of the contract holder or beneficiaries. Accident and health insurance, which includes distinctive products apart from traditional health insurance, account for 26 percent of direct premiums written. In addition to annuities, accident and health, and life insurance products, life insurers may offer financial services such as asset management.

Traditional health insurance, which is not included in this section and is not considered a part of the life/annuity sector, is described under  Private Health Insurance . Health insurance pays for medical, surgical and hospital services received by the insured, as well as routine and preventive care, usually within a network format. Of the many types of plans available, most include a deductible paid by the insured, and benefits received are tax-free.

Accident and health insurance, a product provided by the life/annuity and property/casualty (P/C) sectors, encompasses a variety of specialty products related to health such as:

reimbursement for the time a policyholder spent in a hospital or was disabled;
short- and long-term disability based on employment;
long-term care; and
critical or catastrophic illness insurance.

Accident and health insurance is not meant to replace health insurance.

($ billions, end of year)

	2018	2019	2020	2021	2022	Percent change, 2021-2022 (1)

Life insurance premiums	$145.1	$151.0	$143.0	$159.5	$165.1	3.5%
Annuity premiums and deposits	269.7	339.8	294.6	285.8	343.3	20.1
Accident and health premiums	183.1	185.0	183.1	189.2	188.7	-0.3
Credit life and credit accident and health premiums	1.3	1.4	1.2	1.2	1.2	0.0

Net investment income	187.4	186.7	186.0	200.9	199.1	-0.9
Reinsurance allowance	32.0	-29.7	-22.8	8.5	38.2	NA
Separate accounts revenue	37.3	36.8	37.4	41.0	38.4	-6.3
Other income	44.0	48.7	55.0	57.5	58.8	2.3


Benefits	289.5	301.8	313.2	338.4	321.0	-5.1
Surrenders	350.3	339.6	323.3	326.7	348.1	6.6
Increase in reserves	143.3	120.6	107.8	89.8	128.6	43.2
Transfers to separate accounts	-89.6	-72.0	-69.2	-75.6	-50.1	-33.7
Commissions	58.3	61.2	60.0	64.5	67.5	4.7
General and administrative expenses	65.9	67.8	66.8	69.4	70.5	1.6
Insurance taxes, licenses and fees	10.7	9.3	11.4	10.1	10.4	3.0
Other expenses	11.3	14.4	6.3	14.8	61.6	316.2


Policyholder dividends	18.2	18.1	18.0	17.8	19.7	10.7
Net gain from operations before federal income tax	46.0	70.0	39.1	54.0	57.4	6.3
Federal income tax	3.4	9.4	5.2	8.2	8.5	3.7

Net realized capital gains (losses)	-4.7	-6.9	-10.7	-8.3	-10.8	30.1

Pre-tax operating income	46.0	61.0	39.1	54.0	57.4	6.3
Capital and surplus, end of year	399.9	421.7	441.2	477.5	467.0	-2.2

(1) Calculated from unrounded data.

NA=Not applicable.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

View Archived Tables

	2020		2021		2022
Lines of insurance	Direct premiums written (1)	Percent of total	Direct premiums written (1)	Percent of total	Direct premiums written (1)	Percent of total

Ordinary individual annuities	$217,475,954	28.6%	$206,548,091	26.9%	$237,429,226	28.9%
Group annuities	148,066,084	19.5	163,115,551	21.3	160,156,376	19.5


Group	139,371,108	18.4	140,591,891	18.3	144,355,085	17.6
Other	63,764,322	8.4	68,034,862	8.9	71,246,227	8.7
Credit	889,583	0.1	725,330	0.1	761,493	0.1


Ordinary life	149,042,367	19.6	148,026,526	19.3	163,998,690	20.0
Group life	39,744,272	5.2	39,205,456	5.1	41,984,740	5.1
Credit life (group and individual)	810,896	0.1	687,128	0.1	744,296	0.1
Industrial life	74,820	(3)	85,053	(3)	76,881	(3)

All other lines	39	(3)	72	(3)	283	(3)

(1) Before reinsurance transactions. (2) Excludes accident and health premiums reported on the property/casualty and health annual statements. (3) Less than 0.1 percent. (4) Excludes deposit-type funds.

Credit life insurance, a form of decreasing term insurance, protects creditors, such as banks, but the borrower pays the premium. The policy covers the outstanding loan balance if the borrower dies before the loan is repaid. The face value of a policy decreases as the loan balance is paid down until both equal zero. When insured loans are paid off early, the insurer returns the premiums for the remaining term to the policyholder. Credit accident and health, a similar product, provides a monthly income if the borrower becomes disabled.

Year	Credit life	Credit accident and health
2013	$977,557	$968,691
2014	961,247	955,261
2015	915,437	910,645
2016	831,283	829,033
2017	807,136	838,004
2018	815,280	857,886
2019	830,040	889,327
2020	684,789	730,712
2021	740,023	762,128
2022	738,955	746,816

Life/annuity and P/C insurers are key players in capital markets, with $9.7 trillion in cash and invested assets in 2020, according to S&P Global Market Intelligence. Life insurance and annuity cash and invested assets totaled $4.7 trillion in 2020, and separate accounts assets and other investments totaled $3.0 trillion. P/C insurer cash and invested assets were $2.0 trillion in 2020.

Because life insurance products are long-term, generally in force for 10 years or longer, payments are predictable. Therefore, life/annuity insurers invest primarily in long-term products. In 2023 life insurers, excluding separate accounts, invested 68.1 percent of their assets in bonds and 2.5 percent in corporate stocks. Life insurers invested 13.7 percent of their assets in mortgage loans on real estate that take seven years or longer to mature.

	Amount			Percent of total investments
Investment type	2021	2022	2023	2021	2022	2023
Bonds	$3,532.5	$3,618.0	$3,644.5	70.01%	69.61%	68.14%

Preferred stock	20.5	17.1	17.6	0.41	0.33	0.33
Common stock	121.0	108.8	113.9	2.40	2.09	2.13

First lien real estate mortgage loans	631.9	685.1	723.5	12.52	13.18	13.53
Real estate loans less first liens	8.0	9.3	9.4	0.16	0.18	0.18

Occupied properties	6.0	5.7	5.4	0.12	0.11	0.10
Income generating properties	16.4	16.6	16.8	0.33	0.32	0.31
Properties for sale	0.4	0.3	0.5	0.01	0.01	0.01
Cash, cash equivalent and short term investments	147.8	143.2	189.0	2.93	2.75	3.53
Contract loans including premium notes	131.5	131.4	138.5	2.61	2.53	2.59
Derivatives	96.8	95.4	102.0	1.92	1.83	1.91
Other invested assets	292.3	320.5	340.9	5.79	6.17	6.37
Receivables for securities	9.3	9.9	8.7	0.18	0.19	0.16
Securities lending reinvested collateral assets	19.5	14.3	15.4	0.39	0.28	0.29
Write-ins for invested assets	11.9	21.8	22.1	0.24	0.42	0.41

(1) Data are net admitted assets of life/annuity insurers.

Rank	Group/company	Direct premiums written (1)	Market share (2)
1	MetLife Inc.	$91,284,133	9.4%
2	Equitable Holdings	84,608,664	8.7
3	Athene Holding Ltd.	47,261,675	4.9
4	Massachusetts Mutual Life Insurance Co.	46,179,680	4.8
5	New York Life Insurance Group	43,461,102	4.5
6	Prudential Financial Inc.	37,900,707	3.9
7	Nationwide	37,566,246	3.9
8	Western & Southern Financial	32,704,002	3.4
9	Corebridge Financial	32,107,669	3.3
10	Great West	27,969,037	2.9

(1) Includes life insurance, annuity considerations, deposit-type contract funds and other considerations; excludes accident and health insurance. Before reinsurance transactions. (2) Based on U.S. total, excluding territories.

Rank	Group/company	Direct premiums written (1)	Market share (2)
1	Northwestern Mutual Life Insurance Co.	$13,016,168	8.6%
2	New York Life Insurance Group	9,488,774	6.3
3	Massachusetts Mutual Life Insurance Co.	8,933,121	5.9
4	Prudential Financial Inc.	7,199,885	4.8
5	Lincoln National Corp.	6,553,745	4.4
6	State Farm	5,701,050	3.8
7	Transamerica	4,908,439	3.3
8	John Hancock Life Insurance Co.	4,777,569	3.2
9	Pacific Life	4,578,316	3.0
10	Protective	4,356,796	2.9

(1) Before reinsurance transactions. Based on U.S. total, includes territories. Excludes annuities, accident and health, deposit-type contract funds and other considerations. (2) Based on U.S. total, excluding territories.

Rank	Group/company	Direct premiums written (1)	Market share (2)
1	MetLife Inc.	$8,962,478	22.5%
2	New York Life Insurance Group	3,683,323	9.2
3	Prudential Financial Inc.	3,652,745	9.2
4	Securian Financial Group	2,895,928	7.3
5	Nationwide Mutual Group	2,318,805	5.8
6	Hartford Life & Accident Insurance Co.	2,252,138	5.7
7	Unum Group	1,743,379	4.4
8	Lincoln National Corp.	1,643,538	4.1
9	Standard Life & Casualty Insurance Co.	1,172,829	2.9
10	Sun Life Financial	853,485	2.1

Rank	Group/company	Direct premiums written	Market share (1)
1	MetLife Inc.	$70,478,909	25.2%
2	Equitable Holdings	63,186,478	22.6
3	Great West	24,103,829	8.6
4	Western & Southern Financial	22,434,528	8.0
5	Principal Financial Group Inc.	16,813,194	6.0
6	New York Life Insurance Group	12,330,864	4.4
7	Nationwide	11,121,357	4.0
8	Guardian	5,659,748	2.0
9	Massachusetts Mutual Life Insurance Co.	5,564,758	2.0
10	Tokio Marine	5,375,000	1.9

(1) Based on U.S. total, excluding territories.

Rank	Group/company	Direct premiums written	Market share (1)
1	John Hancock	$16,597,435	27.6%
2	Transamerica	11,542,682	19.2
3	Prudential Financial Inc.	8,475,462	14.1
4	Massachusetts Mutual Life Insurance Co.	4,018,534	6.7
5	Standard	3,684,307	6.1
6	Great West	3,268,075	5.4
7	Securian	2,789,377	4.6
8	New York Life Insurance Group	2,497,490	4.2
9	MetLife Inc.	2,434,886	4.1
10	Mutual of America Life Ins Co.	1,696,772	2.8

Rank	Group/company	Direct premiums written	Market share (1)
1	CVS Health Corp.	$48,625,381	21.9%
2	Unitedhealth group	45,006,609	20.3
3	Cigna	27,530,119	12.4
4	MetLife Inc.	9,924,846	4.5
5	Unum Group	6,826,651	3.1
6	Mutual of Omaha	5,753,849	2.6
7	Aflac	5,104,440	2.3
8	Guardian	4,886,023	2.2
9	Sun Life Financial	4,112,005	1.9
10	Hartford Line & Accident Insurance Co.	3,873,526	1.7

Independent agents control more than half of the individual life insurance market. From 2013 to 2022, independent insurance agents’ share of the personal life insurance market grew from 45 percent to 52 percent. The direct response channel remained the same over this period, at 6 percent. As shown in the chart below, affiliated agents have lost some ground, falling from 43 percent to 38 percent.

View Archived Graphs

According to LIMRA’s 2021 Insurance Barometer Study , there has been a substantial consumer shift in favor of online life insurance shopping and purchasing because of technological advances and the COVID-19 pandemic. Consumer preference for online life insurance shopping increased 29 percent since 2016 when online purchasing was first added as an option to the study.

Worksite marketing is the selling of voluntary (employee-paid) insurance and financial products at the worksite. The products may be sold individually or in groups, and policyholders usually pay premiums through periodic payroll deductions. Worksite sales of life and health insurance totaled $8.75 billion in 2022, up from $8.3 billion in 2021, according to Eastbridge Consulting Group.

Separate accounts, funds maintained separately from an insurer's general assets, contribute to the revenue of life/annuity insurers. According to the National Association of Insurance Commissioners, separate accounts were originally established in response to federal securities laws concerning investment-linked variable annuities. Variable annuities operate like mutual funds, with earnings that vary based on the annuities' investments. After evolving rapidly in the past 20 years, separate accounts now support an array of hybrid investment products. (See Life/Annuity Insurance Income Statement chart above).

In 2021 separate accounts contributed $41 billion to the overall life/annuity insurance revenue of $945.7 billion.

A survey of life insurance efficiency papers: Methods, pros & cons, trends

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Top Life Insurance Statistics for 2024

Saad Imran is a personal finance writer with expertise in insurance, loans, credit cards and mortgages. When not writing, he’s a cat enthusiast who loves playtime with his furry companion.

Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York’s Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.

The state of the life insurance industry is continuously evolving, and understanding trends and changes can help you choose the right policy. Life insurance offers financial support for your dependents after you pass away, helping them cover your final expenses and outstanding debts, such as mortgages or student loans.

In this article, we presented an overview of the most compelling life insurance statistics going into the new year, using data from sources like the American Council of Life Insurers (ACLI), Life Insurance Marketing and Research Association (LIMRA) and the Insurance Information Institute (Triple-I).

If you are interested in purchasing a life insurance policy, consider your financial condition and future goals to find the best life insurance for your needs.

Key Life Insurance Statistics

A study by the LIMRA and Life Happens shows that in 2023, the percentage of people who reported having life insurance increased to 52%, up from 50% in the previous year.
Over the past 12 years, there has been a decrease in overall life insurance ownership, dropping from 63% in 2011 .
About 100 million Americans are either without life insurance or inadequately insured, acknowledging their need for additional coverage, according to data from LIMRA.
A record high of 30% of consumers have indicated their intention to buy life insurance in the upcoming year, also according to LIMRA data.
Another LIMRA study found that the primary reason for owning life insurance is to fund funeral or burial and other end-of-life expenses.
Data from Aflac shows that, on average, life insurance policies pay out $168,000 , but this amount can vary significantly based on the policy.
According to the Triple-I, in 2022, the total amount of life insurance benefits and claims amounted to $797.7 billion .
Based on data from the ACLI and our research, Delaware has the highest average life insurance payout per enforced policy, with an average amount of $4,149.

How Much Does Life Insurance Cost?

The cost of a life insurance policy depends on several factors, including age , gender, medical history, lifestyle and your chosen coverage amount. This means your premium will differ from average policy costs. The following figures and statistics can help you make informed decisions regarding the best life insurance option for your situation.

The above-cited LIMRA study shows that 42% of consumers do not purchase life insurance because of its high cost.
Additionally, over half of Americans overestimate the cost of life insurance, believing it to be three times more expensive than it is. This is why it’s important to understand how insurers calculate the cost of life insurance .
Based on our research, the average monthly premium for a 35-year-old man with a $500,000 policy is $26.
According to LIMRA, 38% of Americans reported that their household would face financial difficulties within six months if a breadwinner were to pass away, with 30% facing such challenges within a month.

What Are the Different Types of Life Insurance?

You can choose from many types of life insurance, each with its unique features and benefits. Knowing about different options can help you decide which suits you best based on your needs. Here are the main types of life insurance available in the market:

Term life insurance : This type of policy will cover you for a specific period, such as 10, 20 or 30 years. It has low premiums and is ideal for those seeking coverage for a limited time or to meet a specific financial goal.
Whole life insurance : A whole life policy includes lifelong coverage, a death benefit and a cash value component. It costs more but will suit those who want permanent coverage and to accumulate cash value.
Universal life insurance: Similar to a whole life policy, universal life insurance provides lifelong coverage but has flexible premiums and death benefits. Its cash value grows according to a specified interest rate and is best for those who want to be able to modify their policy.
Variable life insurance: This policy type is riskier than other forms of permanent coverage as its cash value is invested in various accounts and can fluctuate based on performance. However, it offers a higher growth potential than other options.
Group life insurance: A group life plan has lower premiums and coverage is generally easier to qualify for, often without a health exam . You can get it through your employer as part of your benefits package.

Life Insurance Demographic Trends

Coverage preferences for life insurance can vary based on age groups, genders, socioeconomic backgrounds and other factors. The following trends, which we obtained from the above-mentioned LIMRA study, can give you key insights into the relationship between demographic factors and insurance choices.

The LIMRA study found that Hispanic Americans have a lower rate of life insurance ownership, with 45% reporting they have coverage, which is below the rates for other racial and ethnic groups.
While 41% of single mothers own life insurance, a higher percentage (59%) recognize the need for buying life insurance or enhancing existing coverage.
Life insurance ownership among women is lower compared to men, with 49% of women owning a policy as opposed to 55% of men. This trend marks the fifth consecutive year of declining life insurance ownership among women.
The percentage of parents who own life insurance has increased to 59%, rising from 54% in the previous year.
In 2023, for the first time, consumers expressed a preference for buying life insurance online rather than through in-person meetings. Facebook (62%) and YouTube (58%) emerged as the most popular platforms to find insurance information.
The 2023 Insurance Barometer Study shows that in the next year, a greater percentage of younger demographics, with 44% of Gen Z and 50% of millennials, intend to buy life insurance, surpassing the national average.

Life Insurance Policy Statistics

Knowing which types of policies are popular among consumers can help you understand the current state of the insurance market. Here are some policy statistics related to life insurance:

Data from the ACLI shows that in 2022, term life insurance accounted for 39.3% of all life insurance purchases.
Term life insurance represented a substantial 70.5% of the total face amount issued for individual life policies, totaling $1.3 trillion.
In 2022, permanent life insurance policies made up 60.7% of all life insurance purchases.

Life Insurance Industry Statistics

We gathered the following trends to give you an idea of market changes within the life insurance industry.

Quarterly data from LIMRA shows that year-over-year from 2022, the sale of life insurance policies has increased by 4% .
Year-over-year, the total new annualized premium for individual life insurance rose by 5%, reaching $3.7 billion.
Based on data from Triple-I , independent agents hold a 52% share of the individual life insurance market, while affiliated agents control 38% of the market.
In 2020, the combined total of life insurance, annuity cash and invested assets amounted to $4.7 trillion, according to the Triple-I.
Life insurance companies allocated 70% of assets to bonds and 3% to corporate stocks.

State-by-State Breakdown of Life Insurance Ownership

The map and chart below showcase average life insurance payouts across different states. This detailed view can help you understand how your location may impact the benefits your dependents receive with your life insurance policy.

State	Life Insurance Payout Per Policy In Force
Alabama	$750
Alaska	$2,006
Arizona	$2,556
Arkansas	$1,333
California	$2,243
Colorado	$2,053
Connecticut	$3,615
Delaware	$4,149
District of Columbia	$2,442
Florida	$2,213
Georgia	$1,385
Hawaii	$1,563
Idaho	$1,890
Illinois	$1,633
Indiana	$1,533
Iowa	$2,706
Kansas	$1,571
Kentucky	$1,238
Louisiana	$944
Maine	$2,165
Maryland	$1,469
Massachusetts	$2,565
Michigan	$2,514
Minnesota	$2,885
Mississippi	$950
Missouri	$1,724
Montana	$1,673
Nebraska	$2,000
Nevada	$2,096
New Hampshire	$2,311
New Jersey	$2,333
New Mexico	$1,908
New York	$2,282
North Carolina	$1,500
North Dakota	$1,497
Ohio	$1,792

The Bottom Line

A new LIMRA study shows that 39% of consumers plan to purchase life insurance within the following year. If you’re one of them, understanding the trends within the life insurance industry can help you make decisions when choosing a policy. Different types of policies are available and it is best to evaluate your needs to select the right one.

Although you can estimate pricing based on the average cost of life insurance, your actual cost will depend on your situation. Your location significantly affects your premiums and the death benefit your family receives. If you need help selecting a life insurance policy, we recommend speaking with a financial advisor or registered life insurance agent.

If you have feedback or questions about this article, please email the MarketWatch Guides team at editors@marketwatchguides. com .

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What Is Life Insurance?

Compare Top Companies

Term vs. Permanent Life Insurance

What Affects Life Insurance Costs?

Life Insurance Buying Guide

Benefits of life insurance, who needs life insurance.

What to Do Before Buying

How Life Insurance Works

Riders and Policy Changes

Qualifying for Life Insurance

Bottom line.

Life Insurance

Life Insurance: What It Is, How It Works, and How To Buy a Policy

Amy Fontinelle has more than 15 years of experience covering personal finance, corporate finance and investing.

How to Get Life Insurance
Life Insurance Guide to Policies & Companies CURRENT ARTICLE
Best Age to Get Life Insurance
How Age Affects Life Insurance Rates
Is Life Insurance a Smart Investment?
What to Expect When Applying
Whole Life vs. Universal Life Insurance
Best Life Insurance
Term Life Insurance
Explaining Term Insurance
Group Term Life Insurance
Best Term Life Insurance
Permanent Life Insurance
Cash Value Life Insurance
Whole Life Insurance
Best Whole Life Insurance
Universal Life Insurance
Variable Universal Life Insurance (VUL)
Indexed Universal Life Insurance
Paid-Up Additional Insurance Definition
Adjustable Life Insurance
Guaranteed Issue Life Insurance
Final Expense Insurance
Burial Insurance
Let Riders Drive Your Coverage
Accelerated Benefit Rider
Dread Disease Rider
Family Income Rider
Return-of-Premium Rider
Waiver of Premium Rider
Long-Term Care Rider
Borrowing From Your Policy
Cashing in Your Policy
Cash Surrender Value
Cash Value vs. Surrender Value
Life Insurance vs. IRA for Retirement Saving
How Policy Payouts Work
Taxes on Life Insurance Premiums
Life Insurance Policy Loan: Tax Implications
What Is a Tax-Free 1035 Exchange?
Is Life Insurance Taxable?

Understanding how life insurance works and how to shop for a policy can help you find the best coverage to meet your family's needs.

Life insurance is a contract between an insurance company and a policy owner in which the insurer guarantees to pay a sum of money to one or more named beneficiaries when the insured person dies in exchange for premiums the policyholder pays during their lifetime. The best life insurance companies have good financial strength, a low number of customer complaints, high customer satisfaction, several policy types available, optional riders, and easy application processes.

Key Takeaways

Life insurance is a legally binding contract that promises a death benefit to the policy owner when the insured person dies.
The policyholder must pay a single premium upfront or pay regular premiums over time for the life insurance policy to remain in force,.
When the insured person dies, the policy’s named beneficiaries will receive the policy’s face value, or death benefit.
Term life insurance policies expire after a certain number of years. Permanent life insurance policies remain active until the insured person dies, stops paying premiums, or surrenders the policy.
A life insurance policy is only as good as the financial strength of the life insurance company that issues it.

Investopedia / Theresa Chiechi

Types of Life Insurance

Many different types of life insurance are available to meet all sorts of consumer needs and preferences. Depending on the short- or long-term needs of the person to be insured (or their family members), the choice of whether to select temporary or permanent life insurance will be a major consideration.

Term life insurance

Term life insurance is designed to last a certain number of years, then end. You choose the term when you take out the policy. Common terms are 10, 20, or 30 years. The best term life insurance policies balance affordability with long-term financial strength.

Decreasing term life insurance is renewable term life insurance with coverage that decreases over the life of the policy at a predetermined rate.
Convertible term life insurance allows policyholders to convert a term policy to permanent insurance.
Renewable term life insurance provides a quote for the year the policy is purchased. Premiums increase annually at renewal. These plans usually provide the least expensive term insurance in the first year.

Many term life insurance policies allow you to renew the contract on an annual basis once the original term ends. However, since the renewal premiums are based on your current age, the cost can rise steeply each year. A better solution for permanent coverage is to convert your term life insurance policy into a permanent policy. This is not an option on all term life policies, so look for a convertible term policy if this is important to you.

Permanent life insurance is more expensive than term, but it stays in force throughout the insured’s entire life unless the policyholder stops paying the premiums or surrenders the policy. Some policies allow for automatic premium loans when a premium payment is overdue.

Whole life insurance is one type of permanent life insurance where the premium and death benefit generally remain the same each year. It includes a cash value component, which is similar to a savings account. Cash-value life insurance allows the policyholder to use the cash value for many purposes, such as to take out loans or to pay policy premiums.
Universal life (UL) insurance is another type of permanent life insurance with a cash value component that earns interest. Universal life features flexible premiums. Unlike term and whole life, the premiums can be adjusted over time. It also provides options for a level death benefit or an increasing death benefit .
Indexed universal life (IUL) is a type of universal life insurance that lets the policyholder earn a fixed or equity-indexed rate of return on the cash value component.
Variable universal life (VUL) insurance allows the policyholder to invest the policy’s cash value in an available separate account . It also has flexible premiums and can be designed with a level or increasing death benefit.

Top-Rated Companies to Compare

When shopping for insurance, you might want to start with our list of the best life insurance companies , some of which are listed below.

AM Best Rating	Coverage Capacity
A+	Over $5 million	85	Term, whole, UL, IUL, VUL, final expense
A	Over $5 million	85	Term, whole, UL, IUL, VUL
A++	Over $5 million	90	Term, whole, UL, VUL
A+	Over $5 million	85	Term, UL, IUL, final expense
A++	Over $5 million	90	Term, whole, UL, VUL
A++	Over $5 million	85	Term, whole, UL
A++	Over $5 million	90	Term, whole, UL, VUL

Term life insurance differs from permanent life insurance in several ways but tends to best meet the needs of most people looking for affordable life insurance coverage. Term life insurance only lasts for a set period of time and pays a death benefit should the policyholder die before the term has expired. That's in contrast to permanent life insurance, which stays in effect as long as the policyholder pays the premium. Another critical difference involves premiums—term life is generally much less expensive than permanent life because it does not accumulate cash value.

Before you apply for life insurance, you should analyze your financial situation and determine how much money would be required to maintain your beneficiaries’ standard of living or to meet other financial needs for which you’re purchasing a policy. Also, consider how long you'll need coverage to last.

For example, if you are the primary caretaker and have children two and four years old, you would want enough insurance to cover your custodial responsibilities until your children are grown and able to support themselves.

You might research the cost of hiring a nanny and a housekeeper or using commercial child care and cleaning services, then perhaps add money for education. Include any outstanding mortgage and retirement needs for your spouse in your life insurance calculation—especially if the spouse earns significantly less or is a stay-at-home parent. Total what these costs would be over the next 16 or so years, add a little more for inflation, and that’s the death benefit you might want to buy—if you can afford it.

Burial or final expense insurance is a type of permanent life insurance that has a small death benefit. Despite the name, beneficiaries can use the death benefit as they wish.

What Affects Your Life Insurance Premiums and Costs?

Many factors can affect the cost of life insurance premiums . Certain things may be beyond your control, but other criteria can be managed to potentially bring down the cost before (and even after) applying. Your health and age are the most important factors that determine cost, so buying life insurance as soon as you need it is often the best course of action.

After being approved for an insurance policy, if your health improves later and you’ve made positive lifestyle changes, you can ask to be considered for a change in risk class. Even if it is found that you’re in poorer health than at the initial underwriting , your premiums will not go up. If you’re found to be in better health, then you your premiums may decrease. You may also be able to buy additional coverage at a lower rate than you initially did.

Investopedia / Lara Antal

Step 1: Determine How Much You Need

Think about what expenses would need to be covered in the event of your death. Consider things such as mortgage, college tuition, credit cards, and other debts, not to mention funeral expenses. Also, income replacement is a major factor if your spouse or loved ones will need cash flow and are not able to provide it on their own.

There are helpful tools online to calculate the lump sum that can satisfy any potential expenses that would need to be covered.

Step 2: Prepare Your Application

Life insurance applications generally require personal and family medical history and beneficiary information. You may need to take a medical exam and will need to disclose any preexisting medical conditions, history of moving violations, DUIs, and any dangerous hobbies (such as auto racing or skydiving). The following are crucial elements of most life insurance applications:

Age: This is the most important factor because life expectancy is the biggest determinant of risk for the insurance company.
Gender: Because women statistically live longer, they generally pay lower rates than males of the same age.
Smoking: A person who smokes is at risk for many health issues that could shorten life and increase risk-based premiums.
Health: Medical exams for most policies include screening for health conditions such as heart disease, diabetes, and cancer, plus related medical metrics that can indicate health risks.
Lifestyle : Dangerous occupations and hobbies can make premiums much more expensive.
Family medical history: If there is evidence of major disease in your immediate family, your risk of developing certain conditions is much higher.
Driving record: A history of moving violations or drunk driving can dramatically increase the cost of insurance premiums.

Standard forms of identification will also be needed before a policy can be written, such as your Social Security card, driver's license, or U.S. passport.

Step 3: Compare Policy Quotes

Once you've assembled all of your necessary information, you can gather multiple life insurance quotes from different providers based on your research. Prices can differ markedly from company to company, so it's important to make the effort to find the best combination of policy, company rating, and premium cost. Because life insurance premiums are something you will likely pay monthly for decades, finding the policy that best fits your needs can save you an enormous amount of money.

Our lineup of the best life insurance companies can give you a jump start on your research. It lists the companies we've found to be the best for different types of needs, based on our research of nearly 100 carriers.

There are many benefits to having life insurance . Below are some of the most important features and protections offered by life insurance policies.

Most people use life insurance to provide money to beneficiaries who would suffer a financial hardship upon the insured’s death. However, for wealthy individuals, the tax advantages of life insurance, including the tax-deferred growth of cash value, tax-free dividends, and tax-free death benefits, can provide additional strategic opportunities.

Avoiding Taxes

The death benefit of a life insurance policy is usually tax-free. It may be subject to estate taxes , but that's why wealthy individuals sometimes buy permanent life insurance within a trust. The trust helps them avoid estate taxes and preserve the value of the estate for their heirs.

Tax avoidance is a law-abiding strategy for minimizing one’s tax liability and should not be confused with tax evasion , which is illegal.

Life insurance provides financial support to surviving dependents or other beneficiaries after the death of an insured policyholder. Here are some examples of people who may need life insurance:

Parents with minor children. If a parent dies, the loss of their income or caregiving skills could create a financial hardship. Life insurance can make sure the kids will have the financial resources they need until they can support themselves.
Parents with special-needs adult children. For children who require lifelong care and who will never be self-sufficient, life insurance can make sure their needs will be met after their parents pass away. The death benefit can be used to fund a special needs trust that a fiduciary will manage for the adult child’s benefit.
Adults who own property together. Married or not, if the death of one adult might mean that the other could no longer afford loan payments, upkeep, and taxes on the property, life insurance may be a good idea. One example would be an engaged couple who take out a joint mortgage to buy their first house.
Seniors who want to leave money to adult children who provide their care. Many adult children sacrifice time at work to care for an elderly parent who needs help. This help may also include direct financial support. Life insurance can help reimburse the adult child’s costs when the parent passes away.
Young adults whose parents incurred private student loan debt or cosigned a loan for them. Young adults without dependents rarely need life insurance, but if a parent will be on the hook for a child’s debt after their death, the child may want to carry enough life insurance to pay off that debt.
Children or young adults who want to lock in low rates. The younger and healthier you are , the lower your insurance premiums. A 20-something adult might buy a policy even without having dependents if they expect to have them in the future.
Stay-at-home spouses. Stay-at-home spouses should have life insurance as they contribute significant economic value based on the work they do in the home. According to Salary.com, the economic value of a stay-at-home parent would be equivalent to an annual salary of $184,820.
Wealthy families who expect to owe estate taxes. Life insurance can provide funds to cover the taxes and keep the full value of the estate intact.
Families who can ’ t afford burial and funeral expenses. A small life insurance policy can provide funds to honor a loved one’s passing.
Businesses with key employees. If the death of a key employee, such as a CEO, would create a severe financial hardship for a firm, that firm may have an insurable interest that will allow it to purchase a key person life insurance policy on that employee.
Married pensioners. Instead of choosing between a pension payout that offers a spousal benefit and one that doesn’t, pensioners can choose to accept their full pension and use some of the money to buy life insurance to benefit their spouse. This strategy is called pension maximization .
Those with preexisting conditions, such as cancer, diabetes, or smoking. Note, however, that some insurers may deny coverage for such individuals or charge very high rates.

Each policy is unique to the insured and insurer. It’s important to review your policy document to understand what risks your policy covers, how much it will pay your beneficiaries, and under what circumstances.

What to Do Before Buying Life Insurance

Research policy options and company reviews.

Because life insurance policies are a major expense and commitment, it's critical to do proper due diligence to make sure the company you choose has a solid track record and financial strength, given that your heirs may not receive the death benefit until many decades into the future. Investopedia has evaluated scores of companies that offer all different types of insurance and rated the best in numerous categories.

Consider How Much Death Benefit You Need

Life insurance can be a prudent financial tool to hedge your bets and provide protection for your loved ones in case you die while the policy is in force. However, there are situations in which it makes less sense —such if you buy too much or insure people whose income doesn't need to be replaced. So it's important to consider several factors before making a decision.

What expenses couldn't be met if you died? If your spouse has a high income and you don't have any children, maybe it's not warranted. It is still essential to consider the impact of your potential death on a spouse and consider how much financial support they would need to grieve without worrying about returning to work before they’re ready. However, if both spouses' income is necessary to maintain a desired lifestyle or meet financial commitments, then both spouses may need separate life insurance coverage.

Know Why You're Buying Life Insurance

If you're buying a policy on another family member's life, it's important to ask: what are you trying to insure? Children and seniors really don't have any meaningful income to replace, but burial expenses may need to be covered in the event of their death. Beyond burial expenses, a parent may also want to protect their child’s future insurability by purchasing a moderate-sized policy while they are young. Doing so allows that parent to ensure that their child has a head start towards protecting their future family financially. Parents are typically only allowed to purchase life insurance for their children up to 25% of the in-force policy on their own lives.

Could investing the money that would be paid in premiums for permanent insurance throughout a policy earn a better return over time? As a hedge against uncertainty, consistent saving and investing—for example, self-insuring —might make more sense in some cases if a significant income doesn't need to be replaced or if policy investment returns on cash value are overly conservative.

A life insurance policy has two main components—a death benefit and a premium. Term life insurance has both two components, while permanent or whole life insurance policies also have a cash value component.

Death Benefit

The death benefit or face value is the amount of money the insurance company guarantees to the beneficiaries identified in the policy when the insured dies. The insured might be a parent, and the beneficiaries might be their children, for example. The insured will choose the desired face amount based on the beneficiaries’ estimated future needs. The insurance company will determine whether the purchases has an insurable interes in the insured's life, The insurer will also decide whether the proposed insured qualifies for the coverage based on the company’s underwriting requirements related to age, health, and any hazardous activities in which the proposed insured participates.

Premiums are the money the policyholder pays for insurance. The insurer must pay the death benefit when the insured dies if the policyholder pays the premiums as required. Premiums are determined in part by how likely it is that the insurer will have to pay the policy’s death benefit based on the insured’s life expectancy . Factors that influence life expectancy include the insured’s age, gender, medical history, occupational hazards, and high-risk hobbies. Part of the premium also goes toward the insurance company’s operating expenses. Premiums are higher on policies with larger death benefits, for individuals who are at higher risk, and on permanent policies that accumulate cash value.

The cash value of permanent life insurance serves two purposes. It is a savings account that the policyholder can use during the life of the insured, and the cash accumulates on a tax-deferred basis. Some policies have restrictions on withdrawals depending on how the money is to be used. For example, the policyholder might take out a loan against the policy’s cash value and would pay interest on the loan principal. The policyholder can also use the cash value to pay premiums or purchase additional insurance. Cash value is a living benefit that remains with the insurance company when the insured dies. Any outstanding loans against the cash value will reduce the policy’s death benefit.

Good to Know

The policy owner and the insured are usually the same person, but sometimes they may be different. For example, a business might buy key person insurance on a crucial employee such as a CEO, or an insured might sell their own policy to a third party for cash in a life settlement .

Life Insurance Riders and Policy Changes

Many insurance companies offer policyholders the option to customize their policies to accommodate their needs. Riders are the most common way policyholders may modify or change their plans. There are many riders, but availability depends on the provider. The policyholder will typically pay an additional premium for each rider or a fee to exercise the rider, though some policies include certain riders in their base premium.

The accidental death benefit rider provides additional life insurance coverage in the event the insured’s death is accidental.
The waiver of premium rider relieves the policyholder of making premium payments if the insured becomes disabled and unable to work.
The disability income rider pays a monthly income if the policyholder becomes unable to work a certain period of time (usually several months) due to a serious illness or injury.
Upon diagnosis of terminal illness, the accelerated death benefit rider allows the insured to collect a portion or all of the death benefit while still living.
The long-term care rider is a type of accelerated death benefit that can be used to pay for nursing-home, assisted-living, or in-home care when the insured requires help with activities of daily living, such as bathing, eating, and using the toilet.
A guaranteed insurability rider lets the policyholder buy additional insurance at a later date without a medical review.

Borrowing Money

Most permanent life insurance accumulates cash value that the policyholder can borrow against. Technically, you are borrowing money from the insurance company and using your cash value as collateral. Unlike with other types of loans, the policyholder’s credit score is not a factor. Repayment terms can be flexible, and the loan interest goes back into the policyholder’s cash value account. However, if you don't pay them back, policy loans can reduce your death benefit.

Funding Retirement

Policies with a cash value or investment component can provide a source of retirement income. This opportunity can come with high fees and a lower death benefit, so it may only be a good option for individuals who have maxed out other tax-advantaged savings and investment accounts. The pension maximization strategy described earlier is another way life insurance can fund retirement.

It’s prudent to reevaluate your life insurance needs annually or after significant life events, such as divorce , marriage, the birth or adoption of a child, or major purchases, such as a house. You may need to update the policy’s beneficiaries, increase your coverage, or even reduce your coverage.

Insurers evaluate each life insurance applicant on a case-by-case basis. With hundreds of insurers to choose from, almost anyone can find an affordable policy that at least partially meets their needs. In 2022 there were 912 life insurance and annuity companies in the United States, according to the Insurance Information Institute.

On top of that, many life insurance companies sell multiple types and sizes of policies, and some specialize in meeting specific needs, such as policies for people with chronic health conditions. There are also brokers who specialize in life insurance and know what different companies offer. Applicants can work with a broker free of charge to find the insurance they need. This means that almost anyone can get some type of life insurance policy if they look hard enough and are willing to pay a high enough price or accept a perhaps less-than-ideal death benefit.

Insurance is not just for the healthy and wealthy, and because the insurance industry is much broader than many consumers realize, getting life insurance may be possible and affordable even if previous applications have been denied or quotes have been unaffordable. According to industry research firm LIMRA, 52% of Americans had life insurance in 2023.

In general, the younger and healthier you are, the easier it will be to qualify for life insurance, while the older and less healthy you are, the harder it will be. Certain lifestyle choices, such as using tobacco or engaging in risky hobbies such as skydiving, also make it harder to qualify or lead to higher rates.

You need life insurance if you need to provide security for a spouse, children, or other family members in the event of your death. Life insurance death benefits can help beneficiaries pay off a mortgage, cover college tuition, or help fund retirement. Permanent life insurance also features a cash value component that builds over time.

What Factors Affect Your Life Insurance Premiums?

Age (life insurance is less expensive)
Gender (female tends to be less expensive)
Smoking (smoking increases premiums)
Health (poor health can raise premiums)
Lifestyle (risky activities can increase premiums)
Family medical history (chronic illness in relatives can raise premiums)
Driving record (good drivers save on premiums)

What Are the Benefits of Life Insurance?

Payouts are tax-free. Life insurance death benefits are paid as a lump sum and are not subject to federal income tax because they are not considered income for beneficiaries.
Dependents don't have to worry about living expenses. Most policy calculators recommend a multiple of your gross income equal to seven to 10 years that can cover major expenses such as mortgages and college tuition without the surviving spouse or children having to take out loans.
Final expenses can be covered. Funeral expenses can be significant and can be avoided with a burial policy, or with standard term or permanent life policies.
Policies can supplement retirement savings. Permanent life policies such as whole, universal, and variable life insurance can offer cash value in addition to death benefits, which can augment other savings in retirement.

How Do You Qualify for Life Insurance?

To qualify for life insurance, you need to submit an application. Life insurance is available to almost anyone. However, the cost or premium level can vary greatly based on your age, health, and lifestyle. Some types of life insurance don't require medical information; however, no-exam policies generally have much higher premiums and involve an initial waiting period before the death benefit is available.

How Does Life Insurance Work?

Life insurance works by providing a death benefit in exchange for paying premiums. One popular type of life insurance—term life insurance—only lasts for a set amount of time, such as 10 or 20 years. Permanent life insurance also features a death benefit but lasts for the life of the policyholder as long as premiums are paid.

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CUNA Mutual Life

There are many types of life insurance policies available, each offering a variety of features. Understanding how life insurance works helps you choose the best coverage for you and your family. Once you decide what type of insurance you need and how much coverage makes sense for your situation, compare products from top life insurance companies to determine the best fit.

Insurance Information Institute. " What are the Different Types of Term Life Insurance Policies? "

Insurance Information Institute. " What are the Different Types of Permanent Life Insurance Policies? "

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Salary.com. " How Much Is a Mom Really Worth? The Amount May Surprise You. "

State Farm. " What Determines the Cost of Life Insurance? "

Insurance Information Institute. " Facts + Statistics: Industry Overview ."

LIMRA. " 2023 Life Insurance Fact Sheet ."

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2021 Insurance Barometer Study

Life insurance is on people’s minds.

The 2021 Insurance Barometer Study, by Life Happens and LIMRA , shows that while myths around life insurance persist, COVID-19 has shown people that they have a clear need for life insurance, with the industry making it easier than ever before to obtain coverage. In fact, 31% of consumers said they are more likely to buy life insurance because of the pandemic.

For more information on this study, view our press release .

There is a heightened awareness of the need for life insurance

59% who don’t own life insurance say they need it
31% say they’re more likely to buy life insurance because of the pandemic
48% of Millennials say they plan to buy coverage in the next year
42% of Americans would face financial hardship within 6 months if the primary wage-earner were to die unexpectedly

Awareness has led some to take action with 13% of consumers saying they purchased life insurance for the first time in 2020.

31% say they're more likely to buy life insurance because of the pandemic.

Myth-Busters

According to the survey, about a quarter of people accepted five common myths and misconceptions about life insurance. Some of the top reasons they have for not owning life insurance (they can choose more than one)

81% – It’s too expensive
75% – Have other financial priorities
65% – Not sure how or what type to buy
62% – Haven’t gotten around to it
51% – Don’t like thinking about death

One of the biggest myths around life insurance is that it’s expensive, but the majority of people overestimate the true cost of life insurance by 3x or more and 44% of Millennials thought the cost of term life insurance policy was more than $1,000 a year when it’s closer to $160.*

Easier to Get

Another misconception is that it’s difficult to obtain life insurance, and so people procrastinate. But in response to the pandemic, life insurance companies have pivoted to help consumers expedite the buying process online, from their homes. They are also streamlining the process with simplified underwriting, which influences the consumer’s likelihood to buy coverage: 48% say they are more likely to buy via simplified underwriting, with the top benefits of this process being that it is fast and easy (64%) and avoids the medical exam, blood and urine samples (56%).

The data shows that people don’t regret purchasing life insurance – in fact, they regret not purchasing it earlier: 39% say they wished they’d purchase their life insurance at a younger age.

48% say they are more likely to buy via simplified underwriting.

The full 2021 Insurance Barometer Study is available to Life Happens member companies and can be accessed here . If you have issues accessing it, please contact Erik at [email protected] . For media inquiries, contact [email protected] .

*20 year, $250,000 level term life insurance policy for a healthy 30-year-old

We’re committed to educating Americans about life insurance

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For more information on this study and its methodology, view our press release .

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What to Consider Before Buying Life Insurance

For National Insurance Awareness Day, here’s the lowdown on the types of life insurance out there and what could work for you and your budget.

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Determining whether to purchase life insurance is a big decision. There are numerous policies that provide different types of coverage. Some are for a specific period of time, and others are for life. In light of National Insurance Awareness Day, which is June 28, now is the perfect time to assess whether purchasing life insurance is right for you.

Just like any other insurance plan, life insurance requires you to pay premiums in exchange for coverage. These premiums can be paid through a series of payments or all at once, depending on what works best for your budget. However, you’re not required to purchase a life insurance policy, so it’s important to determine whether you can afford it before moving forward.

In addition to the financial aspect, there are other factors to consider. If your death and the loss of your income would cause financial hardship for your beneficiaries , a life insurance policy may be a good choice. Life insurance can also cover your end-of-life care, funeral expenses and any outstanding debt in the event of a premature death. If any of these apply to you, life insurance might be a feasible solution.

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The different types of life insurance

Before purchasing a life insurance policy, it’s important to know the different types that are available. Some are temporary and some are permanent.

Term life insurance is an example of a temporary policy. These policies typically provide coverage for 10, 20 or 30 years. There are also different subcategories for term life insurance.

Decreasing term life insurance is a renewable type of insurance with coverage that decreases as the end of the term nears. These policies also have a predetermined rate.

With convertible term life insurance, policyholders can convert the term policy into a permanent one.

Renewable term life insurance gives policyholders a quote for the year the insurance was purchased. From there, the policy’s premiums increase annually.

If you’re interested in receiving lifetime coverage, a permanent policy might be more suitable. Permanent life insurance is usually more expensive than term, but the coverage will last until you die or stop paying the premiums. Similar to term life insurance, there are different types of permanent coverage.

One common type is whole life insurance . In addition to providing life-long coverage, this policy also offers a cash value component, which is like a savings account. The cash value component allows the policyholder to take out loans or pay premiums.

Universal life insurance also provides a cash value component, but unlike whole life insurance, the cash value component earns interest. Another perk is that the premiums are flexible, and the policy provides options for level death benefit or increasing death benefit. A level death benefit is a payout from the policy that remains the same regardless of when the policyholder dies. An increasing death benefit is a little different. This type of benefit allows the policyholder to increase the payout amount over time, but the premiums are more expensive.

Another type of permanent life insurance is an indexed universal policy . This type of insurance allows the policyholder to earn a fixed or equity-indexed rate of return on the cash value.

The last option is a variable universal life insurance, which gives the policyholder the option to invest the cash value into a separate account. This policy also includes flexible premiums, and policyholders can choose between a level or increasing death benefit.

How life insurance premiums are determined

In addition to understanding the different types of policies, it’s important to understand the premiums, which are based on a number of different factors. For example, your health and age are huge factors that determine the cost. Therefore, maintaining your health as best you can and purchasing life insurance as soon as you need it may help lower the cost. But how do you know if you actually need it?

As briefly mentioned earlier, life insurance is about providing your dependents with financial support after you're gone. Parents with minor children or children who have special needs could benefit greatly from life insurance. If one parent dies, these policies can help supplement the surviving spouse’s income. If you have a child who requires life-long care, life insurance can help cover that cost once you and your spouse have passed away.

However, parents aren’t the only ones who can benefit from life insurance. These policies can also be useful for adults who jointly own property, families who can’t afford funeral expenses, married pensioners and those who have pre-existing medical conditions.

Purchasing life insurance can be a great way to make sure your beneficiaries have financial support once you pass away, but it comes at a cost. If you’re considering buying life insurance, determine just how much you’ll need and do your research. Meeting with a financial adviser can help determine what kind of policy works best for you and your situation. The last thing you want to do is purchase a policy you can’t afford or one that doesn’t provide the coverage you need.

Pat Simasko is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. Simasko Law is a separate entity and not affiliated with CoreCap Advisors. The information provided here is not tax, investment or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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How ai and aging research can help life insurance companies.

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Robot and dice

If you ask a lay person on the street what life insurance is, and they’ll tell you it is a policy you buy that pays a sum of money to your family when you die. Ask them to explain how life insurance works, and they will probably tell you it is a contract between an insuring company and a policy owner. Now ask them how artificial intelligence (AI) and aging research can help life insurance firms and policy buyers make decisions with conviction, and they’ll scratch their heads and likely walk away from this conversation, or give very general answers.

And while the customers are pretty much in the dark, some of the more innovative insurance companies are building substantial internal and external capabilities in both aging research and artificial intelligence. And there are hundreds of startups with more or less credible technologies that the life insurance companies are partnering with directly or through the open innovation hubs. Some of these innovation superhubs are run by the reinsurance companies but some are run by the global insurance powerhouses such as Generali . For example, House of Insurtech Switzerland . There is a lot of progress in the field.

In this article, I suggest that the recent developments in AI and aging research are going to disrupt the traditional models of how life insurance companies operate and can help them, as well as policy owners, make better informed decisions.

Before we dive into that, however, we need to understand how life insurance really works.

Life insurance concept.

The truth about life insurance and how it really works

In simple words, life insurance can be defined as a contract between an insurance company and a policy holder or buyer, where the insuring company promises to pay a certain amount of money in exchange for a premium, either upon the death of an insured individual or after a set time period.

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Best covid-19 travel insurance plans.

Before you make the decision to purchase life insurance , you will surely have lots of questions. How much will a certain policy cost? How do various life insurance policies compare with each other? Whether you should opt for a term or whole life policy? The list goes on. Unfortunately, while you may have many questions, life insurance companies on their part have only one: How long is this person (policy holder/buyer) likely to live? After all, insurance companies need to accurately assess risk and set your premium.

So before insurance companies decide to insure you or sell you a policy, they will gather lots of information about you to determine how much they’ll charge for coverage and what amount they’ll pay to the people you name as beneficiaries in your policy contract.

Another reason life insurance companies need all of this information about you is to create underwriting standards, which is a critical step in the purchasing process when insurance companies assign applicants a classification based on various factors and determine the appropriate pricing for a life insurance policy.

To help you understand, here’s a rundown of some of the information insurance companies gather about you (at the very least): medical history, motor vehicle records, criminal records, electronic health records, financial records, professional licenses, details about your lifestyle, and much more. Many standard life insurance products that are commonly integrated in employee benefits , annuities and other financial products the amount of this information used is usually minimal and population averages are used. However, for packages with large payouts, detailed health checkups are usually performed.

Underwriters often consider your age, gender, as well as other data – for example if you smoke or drink – to evaluate risk. So if you like a drink or two and work at a high risk job where the chances of you getting injured or dying are higher, you may have to pay higher premiums than someone who does not drink at all and works at a library or someplace with very low risk of getting injured and dying.

The real reason life insurance companies gather information about you is to determine the policy that best fits your needs.

Once insurance companies collect all of this information, they may ask you to chose which type of insurance policy you want to buy.

Generally, there are two types of life insurance: term and permanent insurance.

A term life insurance policy provides coverage for a specific period of time, typically between 10 and 30 years. Permanent life insurance provides coverage that lasts your entire life. There are other types too, such as: Universal life insurance, variable life insurance, simplified issue life insurance, guaranteed issue life insurance, and group life insurance, among others.

Once you select the type of insurance you want to purchase, you might sign a document and think the process is now over and, in a way, you’re right. But that’s not the end of it.

Advances in medical and aging research, driven by an investment boom in longevity biotechnology, are likely to make people live long and healthy lives. This means life insurance companies will have to rethink their entire traditional model of collecting data and assessing risk.

According to data provided by the World Bank, the average global life expectancy in 2019 was 72.7 years, almost 2.3 years more than a decade ago in 2009, and nearly 5.2 years more since the turn of the century. Longer average lifespan alone may disrupt how life insurance works.

Healthier people with longer lifespans, on the other hand, will certainly shake up how life insurance companies operate.

Last year, Amazon founder Jeff Bezos was reported to have invested in a new longevity biotechnology company called Altos Labs, which hopes to prolong human life. The biotechnology company recently launched with an aim to restore cell health and to reverse disease, injury and disabilities. Altos Labs is not the only company working on healthier and longer lives, there are many other companies too.

On the investment side, many new companies emerged over the past decade and started investing in longevity that are managed by experts specializing in this specific field. The $100 million Longevity Vision Fund set up by Sergey Young , Longevity Fund by Laura Deming , LongeVC by Garry Zmudze, Formic Ventures , by Michael Antonov , BOLD Capital by Peter Diamandis , Kizoo Ventures by Michael Greve , and several others. Korify Capital recently launched a new venture fund that aims to raise up to $100 million for investments in biotech platform companies that focus on longevity and mental health. There are other firms aiming to extend heath span and lifespan. including Apollo Health Ventures , which closed a $180 million venture fund in 2021 to build biotechnology and healthtech ventures aimed at increasing human healthspan.

Even the world’s largest intergovernmental organization, the United Nations, recently unveiled the Decade of Healthy Aging (2021-2030) , which aims to improve the lives of older people.

There are countless other examples of similar investments and pledges in longevity research. We are living in a remarkable era where stakeholders from the private sector, billionaires, and governments are joining hands to ensure healthier and longer lives of all humans. All of these steps mean that life insurance companies, as we know them now, will cease to exist in the future.

However, there are certain technologies that life insurance companies can utilize and that will actually help them and people make better informed decisions with regards to buying life insurance.

Healthcare technology concept for the use of artificial intelligence in population health.

Why AI and aging research will disrupt the life insurance market

The recent advances in machine learning and artificial intelligence, coupled with increases in computational power, have led to a lot of interest and hype in longevity biotechnology . Hundreds of data scientists and companies are taking advantage of this hype to propel research and discovery of new technologies in aging research.

One of the major new areas in aging research are biomarkers of aging that give the true biological age of humans that may be different from their chronological age. One of the most advanced biomarkers of aging are deep aging clocks that can help researchers predict biological age as well as mortality of humans. In 2013, Steven Horvath published an article called ‘ DNA methylation age of human tissues and cell types ,’ in which he outlined the development of a multi-tissue predictor of age that allows for the estimation of the DNA methylation age of most tissues and cell types. He also formed an aging clock that can be used to address questions in developmental biology, cancer, and aging research.

There have been several more studies on such clocks since 2013. For example, I was part of a team in 2016 and we published a study on the first deep aging clock titled ‘ Deep biomarkers of human aging: Application of deep neural networks to biomarker development .’ Since our study was published, many other aging clocks that can predict age as well as mortality rapidly entered into many industries .

While there are types of aging clocks that require expensive data such as blood tests, or even tissue tests, there are also other types of aging clocks that are very simple. These clocks can use sensor data, data from your mobile phone, and even psychological surveys, to accurately predict your psychological age. One example is a questionnaire developed by XPRIZE and Deep Longevity that uses AI to analyze a users’ answers to predict their chronological age.

This research is rapidly propagating into the clinical practice with the advent of a new branch of medicine - longevity medicine where artificial intelligence is pretty much a central theme . Thousands of physicians around the world started studying this exciting new area, and many of the aging biomarker-enabled clinical trials and meta clinical are on the way.

Aging clocks that can accurately predict the true biological age of humans are gaining popularity across various industries because of their broad range of uses. So, how can life insurance companies use AI-based clocks in their industry? Keep reading below.

InsurTech - Insurance Technology

Here’s how life insurance companies can benefit from AI and aging research

First and foremost, life insurance companies can use AI-based aging clocks for the underwriting process. Since these clocks are better predictors of mortality than chronological age, the biological age can be plugged into the actuarial tables to better assess the risks.

Second, aging clocks can be used for customer acquisition. People who are more aware of their biological age may be more interested in planning their future and buy life insurance products.

Third, life insurance companies can benefit from AI to develop new products. There are some cutting-edge insurance companies that are actually planning to use these clocks to develop new exciting products that can help them get new customers, retain them longer and make them more engaged. Here the term LifeHacker gets a completely different meaning!

Fourth, it is clear that there is a boom in the longevity biotechnology industry and huge progress in aging research is expected to be made in the next few years. AI-based aging clocks provide a very good entry point for the insurance companies to get into the field of aging research and actually contribute while protecting their business and innovating in science and technology.

Finding the way.

The bottom line

Imagine a world, not so much in the distant future, where the average life expectancy exceeds 100 years. Now imagine that that 100 year lifespan does not include any diseases but is rather a healthy lifespan. Thanks to investments and research in longevity biotechnology made in the last few years, coupled with more interest from the young scientists , this idea of a 100 year healthy lifespan will soon become a reality. As better predictors of chronological and biological age enter the market, it is equally important for companies to fully take advantage of deep aging clocks simply because of their broad range of applications. This is an area where life insurance companies can use AI and aging research to make better decisions regarding risk assessment and setting premiums for new users/buyers. Now is the time to ditch the traditional models set by life insurance companies and embrace the new era led by biotechnology.

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Life Insurance Illustrations

Issue : One of the disclosures available to life insurance consumers is the life insurance illustration. An illustration is a presentation or depiction provided to prospective or new policy owners that shows how the policy should perform under specific circumstances set out in the illustration. While the components of illustrations may differ depending on the type and complexity of the policy, there are similarities across policy forms. Items common to all life insurance policy illustrations include the benefits entitled to a policyholder, the premiums required to maintain the benefit, the expenses related to policy issue and maintenance, and the benefit and premium periods.

Overview : Life insurance illustrations are subject to the Life Insurance Illustrations Model Regulation (#582) . The purpose of Model #582 is to “provide rules for life insurance policy illustrations that will protect consumers and foster consumer education.” It is applicable to all group and individual life insurance policies and certificates with illustrated death benefits exceeding $10,000. Exceptions to this include variable life insurance, credit life insurance contracts, and annuities .

The model allows the insurer to choose whether a policy form will be marketed with an illustration. For policy forms actively marketed prior to the effective date of the regulation, the insurer is required to identify the forms that will use an illustration in the sales process. Policy forms issued after the effective date of the regulation must include a similar identification when filing. For any policy form identified as one not to be marketed with an illustration, the insurer is prohibited from providing an illustration for any policy using that form prior to the first policy anniversary.

Model #582 defines three types of illustrations: 1) a basic illustration; 2) a supplemental illustration; and 3) an in-force illustration. The basic illustration is used in the marketing of the policy and shows both guaranteed and non-guaranteed elements of the policy. Among the guaranteed elements are policy benefits, premiums, values, credits, and charges that are guaranteed and determined at issue. Each of these elements has a non-guaranteed counterpart in the basic illustration that is not guaranteed or determined at issue. Using a universal life policy basic illustration as an example, the non-guaranteed elements include current death benefits, current fund accumulation, and the cash value and premiums related to the current benefits. These values are subject to the minimum values provided by the policy guarantees, and they cannot provide values more favorable than the illustrated values based on the company’s actual recent historical experience.

In addition to the basic illustration, the company may provide a supplemental illustration that depicts only the non-guaranteed elements permitted in the basic illustration. The format of the supplemental illustration may differ from the basic illustration, but it is still subject to the requirements for non-guaranteed elements defined for the basic illustration. The supplemental illustration must refer the policy owner to the basic illustration for guaranteed elements and other important information.

After the first policy anniversary, the company may choose to provide, or the policy owner may request, periodic updates on the policy’s performance. These updates are provided in the form of in-force illustrations. All aspects of the in-force illustration are like the basic illustration, including listing the age of the insured as the issue age plus the number of years the policy has been in force.

Model #582 contains specific requirements concerning the inclusion of the basic illustration as part of the life insurance policy delivery process. The requirements state that if marketing the policy includes an illustration and the policy is applied for as illustrated, the authorized company representative must submit the illustration, signed by that representative and the applicant, to the insurer at the time of policy application. If an illustration is not used in the sale of the policy, both the applicant and the authorized company representative must sign a form provided by the insurer acknowledging that no illustration was used. If an illustration is presented prior to application and is later revised before the policy is issued, the new illustration must be labeled “Revised Illustration.” In all cases where an illustration is required, the policy applied for or issued must have an illustration accurately representing the policy and appropriately signed by the applicant or policy owner and the authorized company representative. The illustration must be provided prior to or simultaneously with the policy delivery.

To provide guidance to policies whose benefits are tied to an external index or indices, the NAIC adopted Actuarial Guideline XLIX—The Application of the Life Illustrations Model Regulation to Policies with Index-Based Interest ( AG 49 ) on Aug. 16, 2015. AG 49 was developed to bring uniformity to the illustrations of policies tied to an external index or indices by providing a reasonable cap on the illustrated credited rate. Uniformity across illustrations helps clients to compare the policies of different companies more easily.

Status : The NAIC encourages states to adopt model laws and regulations designed to inform and protect insurance consumers. Model #582 provides rules for life insurance policy illustrations that will protect consumers and foster consumer education. Life insurance and annuities are regulated by state insurance commissioners. Accordingly, state insurance departments provide regulatory oversight to ensure all companies under their jurisdiction abide by the standards defined in the model.

Committees Active on This Topic

Media queries should be directed to the NAIC Communications Division at 816-783-8909 or [email protected] .

There's no one-size-fits-all answer

Key factors affecting life insurance cost

Getting an idea of your life insurance cost, how much does life insurance cost.

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The average cost of a life insurance policy ranges from $40 to $55 monthly.
The true cost varies by the type of insurance, coverage amount, and personal factors.
Permanent insurance tends to be more expensive than term life insurance and is used differently.

Life insurance is surprisingly affordable, but premiums vary based on the specific type of life insurance . Policygenius reports the average annual cost of a $500,000 term life policy for 30-year-old males and females is about $300. The same whole life insurance policy costs approximately $5,409 per year. Other factors, like your age and health, can also influence cost.

There's no one-size-fits-all answer

You can explore various options with term and whole life insurance, guaranteed-to-pay-out whole life policies vs. plans with an expiration date, and more. Life insurance isn't one-size-fits-all.

While an average amount can give you an idea of what you'll pay, many factors go into life insurance costs, like the type of coverage, age, where you live, and other personal factors. multiple factors

More than just age, sex, and type of insurance can influence your rates. Your lifestyle and health history could also determine the price you pay. Here are a few things that could make your coverage more expensive than someone your age.

The most noticeable difference is in the older ages of the sample premiums — after age 40, premiums go up significantly. The sooner you get your coverage, the less you could pay each month.

Gender plays a significant role in your life insurance rate. For the same insurance policy, a female and a male will pay different monthly coverage amounts. Males will generally pay more each year.

Amount of coverage

The more coverage you require, the higher your insurance will be. Policygenius data illustrates how term life insurance costs compare based on age, gender, and coverage amount.


20	Female	$15.01	$22.65	$33.63
	Male	$19.18	$30.20	$47.51
30	Female	$15.17	$22.98	$36.90
	Male	$18.19	$29.32	$48.89
40	Female	$21.66	$35.27	$60.65
	Male	$25.39	$42.94	$75.24
50	Female	$43.92	$78.29	$139.50
	Male	$56.69	$102.50	$188.29
60	Female	$107.83	$194.16	$354.51
	Male	$149.38	$268.04	$499.98

Source: Policygenius

These life insurance quotes are based on a 20-year term life insurance policy for people with few health conditions who don't smoke.

Health

Life insurance companies can check your health history and medication history in two ways: a medical records database and your medical exam (although it's possible to get life insurance without a medical exam ). Like health insurance, pre-existing conditions could also impact the rate you pay.

Type of insurance

There are two main types of life insurance: permanent life insurance (whole, universal, and variable life insurance) and term life insurance. Each type grows and pays death benefits differently, and each insurance cost has very different associated costs.

Take a look at the average cost of whole life insurance based on age, gender, and coverage amount.


20	Female	$147.50	$290.00	$558.50
	Male	$175.50	$347.00	$670.50
30	Female	$209.50	$414.50	$814.00
	Male	$245.50	$487.00	$954.50
40	Female	$305.00	$605.50	$1,195.00
	Male	$371.00	$737.00	$1,422.00
50	Female	$480.50	$957.00	$1,899.00
	Male	$569.50	$1,134.50	$2,222.00
60	Female	$800.50	$1,597.00	$3,179.50
	Male	$957.00	$1,909.50	$3,769.00

Lifestyle

Avid skydivers, scuba divers, or travelers could find their insurance rates higher than others. It's not uncommon for insurers to ask about your history with these activities, travel history, and future plans. A bad driving record could also add to the cost of life insurance.

Life insurance for smokers is also more expensive. Insurance company Protective Life research shows that life insurance is 100 to 300 times more expensive for smokers.

See the table for the average rates for smokers based on age, gender, and coverage amount:

Term life insurance for smokers


20	Female	$35.71	$60.59	$101.32
	Male	$44.50	$76.43	$132.24
30	Female	$38.52	$65.75	$117.20
	Male	$46.90	$80.95	$143.89
40	Female	$62.74	$113.40	$207.38
	Male	$78.26	$145.39	$266.49
50	Female	$137.94	$257.05	$465.89
	Male	$188.09	$351.50	$660.83
60	Female	$320.17	$617.51	$1,123.64
	Male	$461.29	$887.93	$1,642.70

These life insurance quotes are based on a 20-year term life insurance policy for people with no health conditions but smoke.

Whole life insurance for smokers


20	Female	$177.00	$348.00	$670.20
	Male	$210.60	$416.40	$804.60
30	Female	$251.40	$497.40	$976.80
	Male	$294.60	$584.40	$1,145.40
40	Female	$366.00	$726.60	$1,434.00
	Male	$445.20	$884.40	$1,706.40
50	Female	$576.60	$1,148.40	$2,278.80
	Male	$683.40	$1,361.40	$2,666.40
60	Female	$960.60	$1,916.40	$3,815.40
	Male	$1,148.40	$2,291.40	$4,522.80

Use an online life insurance cost calculators

Online calculators help you estimate how much coverage you need. Calculating this coverage includes your debt, income, mortgage, children's education expenses, and final expenses.

Work with an insurance broker

Like online calculators, insurance brokers help you determine your coverage needs and offer personalized advice. They can also assist with finding the right policy that fits your budget.

Compare quotes from multiple insurers

Insurance companies weigh risk factors differently, so you'll see different rates with different companies. Comparing quotes from various companies will help you find the best price for the coverage you need.

Cost of life insurance FAQs

One way to get affordable life insurance options is by choosing a term life insurance policy, which gives you significant coverage for an affordable price. Maintaining a healthy lifestyle is also key to lowering your life insurance premiums. Keeping your weight under control, avoiding smoking, and managing any medical conditions you have are among the biggest ways to do so.

Health conditions don't always mean higher premiums. Some insurers offer lower rates than their competitors for specific conditions. Shopping around can ensure you get the best rates for your risk profile.

Whether your premiums increase over the course of a policy depends on your policy. Generally, premiums are fixed, so they won't go up throughout your policy's lifetime. As a result, buying life insurance while young and healthy can help you secure cheaper rates.

You can find the best life insurance rates using comparison websites. Many of these sites generate real live quotes and side-by-side comparisons in minutes — a quick and easy way to find the best rates and coverage. Speaking to brokers requires a bit more effort. You

Life insurance rates can change after approval due to multiple reasons. You may see a rate increase if there's a change in your policy (e.g., you convert your policy or include riders). Rates rarely decrease unless there is a significant change in your health and lifestyle (e.g., quitting smoking).

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Insurance-life

The Simple Reason Why I'd Never Buy Whole Life Insurance

Published on June 14, 2024

By: Maurie Backman

Whole life insurance accumulates a cash value and provides lifelong coverage.
Term life insurance does not accumulate a cash value and only offers coverage for a limited period of time.
Because of the cost of whole life insurance, I've chosen to protect my family with a term life policy instead.

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Buying life insurance wasn't really a task that was on my radar until I had my kids. Sure, my husband and I shared a mortgage and other expenses. But the way I saw it, he was capable of fending for himself, so why buy a policy to protect him only? (Sorry, honey.)

When life insurance costs a fortune

I'll cut right to the chase. The reason I'd never buy whole life insurance is due to the exorbitant cost.

Policygenius says that a 30-year-old non-smoking male can expect to pay $26 per month, or $312 per year, for a 20-year term life insurance policy with a $500,000 benefit. Want to know what the same whole life policy might cost? Try $451 a month, or $5,412 per year.

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To be fair, whole life insurance has a couple of benefits that term life insurance doesn't. With a whole life policy, the person insured is covered forever. With term life insurance, as the name implies, coverage only lasts for a limited period of time.

Also, whole life insurance accumulates a cash value . This gives those with that type of insurance the option to eventually take the money and run, or borrow against a policy. Term life insurance doesn't accrue a cash value. Someone with a 30-year term policy who doesn't pass away during that time gets no money, nor do their beneficiaries (though that person gets the benefit of living, which isn't too shabby).

But while I can recognize the upside of whole life insurance, no part of me can justify the cost. And though some people say that whole life insurance can serve as a backup form of savings, I'd rather use other tactics to build savings myself.

The appeal just isn't there

The idea of getting some sort of payday from a life insurance policy no matter what is a nice prospect. And whole life insurance allows for that. But the way I see it, rather than be locked into expensive premiums for whole life insurance, I can instead take the money I'm not spending and invest it in stocks or other assets.

Let's say I'm saving $400 a month by sticking with term life insurance (in reality, I'm probably saving more, but let's use that number anyway). If I were to invest $400 a month in a stock portfolio over 30 years, all the while generating an average annual 10% return, which is a bit below the stock market's average, I'd end up with about $790,000.

So in that case, why should I pay a life insurance company more money when I can take savings matters into my own hands? And who knows? If I'm good at picking stocks, I might do even better than a 10% return in my portfolio.

Plus, this way, if I run into a period where I can't swing the extra $400 a month to invest, it's no big deal. With a whole life policy, not making payments for several months could mean losing coverage. It's a risk I don't want to take.

I'm not going to say that whole life insurance is a disastrous idea for everyone. And those who aren't sure about it should talk to a financial advisor and see what they say. But I know that whole life insurance isn't the right option for me.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today .

Our Research Expert

Maurie Backman is a personal finance writer covering topics ranging from Social Security to credit cards to mortgages. She also has an editing background and has hosted personal finance podcasts.

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Life Expectancy Calculator

Use our free life expectancy calculator to get a better grasp of the years ahead.

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Why You Should Calculate Your Life Expectancy

As you age, the risk of death increases. While it may not be a pleasant thought, it’s the reality of life. Rather than simply hoping that you live as long as possible, it’s a good idea to calculate your estimated life expectancy. Knowing how long you’re likely to live (barring any unforeseen events) can help you create a more nuanced plan for your life.

Here are just a few things that our life expectancy calculator can help you do:

Estimate how many years of retirement income you will need
Plan for cost of living changes as you age
Make financial plans for your spouse and any dependents
Craft a more nuanced estate plan
Account for your housing and long-term care needs

Did You Know? The average life expectancy in the United States is 73.5 for men and 79.3 for women. 1

Your age can have a major impact on the way you live and what choices you make before and during retirement. If you anticipate living for another 30 years, you’ll want to make sure that you have the savings and retirement income to cover it. On the other hand, if your life expectancy is only a few remaining years, you’ll likely prioritize getting your affairs in order, ensuring that you can leave something for your loved ones. In either case, having an idea of your life expectancy now can help you make the right decisions for yourself and your family.

What Factors Can Affect Your Lifespan?

There are dozens of factors that can affect your lifespan, but your current age and gender are the two most important components. When calculating things like insurance rates and annuity payouts, companies and regulatory agencies often use actuarial life calculations. The Social Security Administration provides a detailed table of actuarial life spans every year. These calculations not only provide you with your estimated life expectancy based on your gender and current age, but also the probability of death within a year. 2 However, these tables aren’t very easy to read and interpret, which is why it’s much easier to use a life expectancy calculator.

Pro Tip: Worried about how you’re going to fund a long retirement? Check out our guide to finances for seniors for help!

It’s also important to remember that life expectancy estimates are based on probabilities. Other factors that can affect your life expectancy include:

Lifestyle and activity levels
Sleep routine
Smoking habits
Drinking habits
Family health history
Socioeconomic status

This means that it’s never an exact science, and you shouldn’t let the results of the calculations make you worry. Instead, use the results to plan your life and retirement accordingly.

How to Interpret Your Life Expectancy Results

When you use our life expectancy calculator, you only have to input two pieces of information: your gender and current age. With this information, we calculate the approximate number of years you have left. Remember, this is just an estimate based on averages, so don’t be disheartened if the results aren’t as positive as you hoped!

Pro Tip: Check out our guide to senior health and wellness to learn about the ways you can stay on top of your health as you age.

Once you click “Calculate,” you’ll be presented with a line graph. The x-axis (horizontal axis) shows your age in years, while the y-axis (vertical axis) shows the number of years you potentially have left. You’ll see a dot at the point where your current age and the “years left” merge. Hovering over this dot will show you the exact number you’re looking for.

It’s important to understand that your results are based on years of data analysis related to the life spans of men and women. It is not a diagnosis, prognosis, or official confirmation of any kind. You should look at these results as a general guidepost for your future.

FYI: Learn more about life expectancy in the United States by checking out our average life expectancy statistics page. We’ve covered the data by state for a closer look at how certain factors affect life expectancy.

FAQs About Life Expectancy

Gender and age are the two most accurate predictors of life expectancy. Historical data shows that women tend to outlive men by a few years, and the accuracy of your life expectancy, whether you’re male or female, increases dramatically with age.

There is a 55% probability that a man will live to 85, while there is a 65% probability that a woman will live to 85.

Statistically, residents of Hawaii live longer than residents in any other state. The average life expectancy in Hawaii is 80.7, which is higher than the national average. 3

Are you a journalist or researcher looking for data or expertise to support your work? See our open data portal , or reach out to us at [email protected] to connect with an expert on aging in America.

Centers for Disease Control and Prevention. (2023). Life Expectancy .

Social Security Administration. (2023). Actuarial Life Table .

CNBC News. (2023). These are the 10 best states in the U.S. for a long, healthy life—California didn’t make the top 5 .

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What is Driving Widening Racial Disparities in Life Expectancy?

Latoya Hill and Samantha Artiga Published: May 23, 2023

Introduction

Amid the COVID-19 pandemic, life expectancy in the U.S. declined 2.7 years between 2019 and 2021, from 78.8 years to 76.1 years, marking the largest two-year decline in life expectancy since the 1920’s. This decline further widened the existing gap in life expectancy between the U.S. and other comparably large and wealthy countries. It also exacerbated longstanding racial disparities in life expectancy and mortality within the U.S., contributing to excess deaths and increased costs . This analysis examines trends in life expectancy and leading causes of death by race and ethnicity and discusses the factors that contribute to racial disparities in life expectancy. In sum, it finds:

There was a sharp drop-off in life expectancy between 2019 and 2021, with particularly large declines among some groups. American Indian and Alaska Native (AIAN) people experienced the largest decline in life expectancy of 6.6 years during this time, followed by Hispanic and Black people (4.2 and 4.0 years, respectively).
Reflecting these declines, provisional data for 2021 show that life expectancy was lowest for AIAN people at 65.2 years, followed by Black people, whose expectancy was 70.8 years, compared with 76.4 years for White people and 77.7 years for Hispanic people. It was highest for Asian people at 83.5 years. Data were not reported for Native Hawaiian and Other Pacific Islander (NHOPI) people.
These declines were largely due to COVID-19 deaths and reflect the disproportionate burden of excess deaths, including premature excess deaths (before age 75), among people of color during the pandemic. Although COVID-19 mortality was a primary contributor to the recent decrease in life expectancy across groups, leading causes of death vary by race and ethnicity.

These recent stark declines and widening racial disparities in life expectancy amplify the importance of addressing underlying drivers of these disparities, including inequities in health insurance coverage and access to care and social and economic factors that drive health.

Trends in Life Expectancy by Race/Ethnicity

Life expectancy at birth represents the average number of years a group of infants would live if they were to experience throughout life the age-specific death rates prevailing during a specified period. Life expectancy is one of the most used measures of population health, enabling comparisons in health status between countries, states, local communities, and demographic groups. Differences in life expectancy occur across a broad range of dimensions which often intersect with each other, including race, socioeconomic status, gender, geography, and other characteristics. For example, In the U.S. and all other comparable countries, men tend to have shorter life expectancy at birth than women. In 2021, life expectancy for women in the U.S. was 5.9 years higher than for men (79.1 years vs. 73.2 year, respectively), and similar gender disparities persisted within racial and ethnic groups. This analysis focuses on differences in life expectancy by race and ethnicity overall, but within racial and ethnic groups there is variation by these other factors, such as gender.

Prior to 2015, there were relatively steady increases in life expectancy in the U.S., but racial disparities persisted. Before 2015, life expectancy in the U.S. steadily increased with an overall gain of about 10 years between 1960 and 2015 from 69.7 years to 79.4 years. While there have been large gains in life expectancy across racial and ethnic groups, racial disparities have been longstanding and persisted over time. Black people have consistently had lower life expectancy than White people, while, conversely, Hispanic people have consistently had longer life expectancy compared to White people. When life expectancy reached its peak in 2014, life expectancy for Black people was more than three years shorter than White people (75.3 vs. 78.8 years), and Hispanic people had a longer life expectancy at 82.1 years (Figure 1 and Appendix Table 1 ). (Data were not available for other groups.)

Causes of Recent Life Expectancy Declines

The declines in life expectancy between 2019 and 2021 largely reflect an increase in excess deaths amid the COVID-19 pandemic, which disproportionately impacted Black, Hispanic, and AIAN people . KFF analysis finds the pandemic was associated with faster rises in premature mortality rates and resulted in more excess years of life lost for people of color compared to their White counterparts, with people of color accounting for 59% of excess years of life lost while making up 40% of the population. Other analysis further finds that COVID-19 mortality had the largest contribution to the decline in life expectancy between 2020 and 2021 among AIAN, Black and White people, accounting for 21.4%, 35.0%, and 54.1% of their declines, respectively. Among Hispanic and Asian people, COVID-19 had the second largest contribution to the decline in life expectancy, accounting for 25.5% and 16.6% of their declines, respectively. The largest contributor to the decline for Hispanic people was an increase in mortality due to unintentional injuries, while growth in cancer deaths was the primary contributor to the decline for Asian people between 2020 and 2021.

Although COVID-19 mortality was a primary contributor to the recent decrease in life expectancy across groups, leading causes of death varied by race and ethnicity. Overall, COVID-19 was the third leading cause of death in 2021, after heart disease and cancer. However, COVID-19 was the top leading cause of death for Hispanic and AIAN people, followed by heart disease and cancer (Figure 3). Among Black, Asian, and White people, COVID-19 was the third leading cause of death, outranked by heart disease and cancer.

Provisional data from 2022 show that overall mortality declined 5.3% between 2021 and 2022, and that, in 2022, the three leading causes of death were heart disease, cancer, and unintentional injuries. During this time, COVID-19 deaths declined almost 50% overall and across all racial and ethnic groups, dropping to the fourth leading cause of death. Despite these declines in COVID-19 deaths, AIAN and Black people continued to have higher COVID-19 death rates compared to White people. Declining death rates from COVID-19 may improve life expectancy overall, however racial gaps will likely persist given the continued disparities in COVID-19 and other leading causes of death.

Factors Contributing to Racial Life Expectancy Disparities

Research suggests that the factors driving disparities in life expectancy are complex and multifactorial. They include differences in health insurance coverage and access to care, social and economic factors, and health behaviors that are rooted in structural and systemic racism and discrimination (Figure 4).

Figure 4: Health Disparities are Driven by Social and Economic Inequities

People of color are more likely than their White counterparts to be uninsured and to face other barriers to accessing health care that may contribute to shorter life expectancy. Data show that people of color are less likely to have health insurance and more likely to face barriers to accessing care, such as not having a usual source of care. Among AIAN people, chronic underfunding of the Indian Health Service further contributes to barriers to health care. Research shows that, overall, uninsured people are more likely than those with insurance to go without needed medical care due to cost and less likely to receive preventive care and services. Research further shows that uninsured people have higher mortality rates and lower survival rates than people with insurance.

Underlying social and economic inequities also drive disparities in mortality and life expectancy. Hispanic, AIAN, and Black people are more likely to have lower incomes and educational attainment levels compared to White people, and studies find that people with higher incomes and more education live longer lives. Other social and economic factors may also affect life expectancy. For example, historic housing policies, including redlining, and ongoing economic inequities have resulted in residential segregation that pushed many low-income people and people of color into segregated urban neighborhoods. Research finds that living in racially segregated neighborhoods is associated with shorter life expectancy and higher mortality rates for Black people.

Social and economic factors can also shape health behaviors and exposure to health risks that influence life expectancy , For example, Black and AIAN people have higher rates of smoking , substance and alcohol use disorders , and obesity compared to White people. Research suggests that eliminating smoking and obesity would greatly narrow disparities in life expectancy between Black and White people. People of color are also disproportionately affected by violence, including police and gun-related violence. Research shows African American and AIAN men and women and Latino men are at increased risk of being killed by police compared to their White peers. Black and Hispanic adults also are more likely than White adults to worry about gun violence according to 2023 KFF survey data . Other KFF analysis shows that firearm death rates increased sharply among Black and Hispanic youth during the pandemic driven primarily by gun assaults and suicide by firearm.

Research also highlights the role of racism and discrimination in driving racial disparities in mortality . Many of the inequities described above are rooted in racism and discrimination. Racism also contributes to lower quality of care among people of color. For example, a KFF/The Undefeated survey found that most Black adults believe the health care system treats people unfairly based on their race, and one in five Black and Hispanic adults report they were personally treated unfairly because of their race or ethnicity while getting health care in the past year. Beyond driving structural inequities and differences in experiences obtaining health care, research also demonstrates that racism and discrimination have direct negative impacts on health. For example, research finds that the cumulative effects of exposure to racism and chronic stress , referred to as allostatic load , may contribute to a more rapid decline in health and higher mortality among Black people. The health of AIAN people has also been negatively affected by ongoing racism and discrimination , and intergenerational trauma stemming from historical actions and policies, including genocide, removal from native lands, and assimilation efforts, including Indian boarding schools.

Some life expectancy patterns are not fully understood or observable in the data presented. Notably, Hispanic people have longer life expectancy than their White counterparts despite experiencing increased barriers to accessing health care and social and economic challenges typically associated with poorer health outcomes. Researchers have hypothesized that this finding, sometimes referred to as the Hispanic or Latino health paradox , in part, may stem from variation in outcomes among subgroups of Hispanic people by origin, nativity, and race, with better outcomes for some groups, particularly recent immigrants to the U.S. However, the findings still are not fully understood. Measures of life expectancy for Asian people as a broad group may mask underlying differences among subgroups of the population who vary across health access and social and economic factors. Research has shown variation in life expectancy among Asian subgroups, with Chinese people having the longest life expectancy and Vietnamese people having the shortest life expectancy, which may in part reflect differences in socioeconomic status . Additionally, data limitations for NHOPI people prevented the ability to include them in this analysis. Efforts to expand and improve data collection for NHOPI people will be important to gain a better understanding of their experiences, particularly since they suffered disproportionate impacts on mortality from COVID-19.

Overall, the data suggest that the COVID-19 pandemic exacerbated longstanding racial disparities in life expectancy. The recent declines and widening of disparities in life expectancy highlight the urgency and importance of addressing disparities in health broadly and increased attention to disparities in mortality and life expectancy specifically. Continued efforts within and beyond the health care system will be important to reduce ongoing racial disparities in life expectancy, many of which are rooted in systemic racism. Within the health care system, these may include ongoing efforts to reduce gaps in health insurance, increase access to care, and eliminate discrimination and bias. Beyond the health care system, addressing broader social and economic factors, including those that drive disparities in behavioral risks, will also be important.

Racial Equity and Health Policy
Race/Ethnicity
American Indian/Alaska Native

news release

Recent Widening of Racial Disparities in U.S. Life Expectancy Was Largely Driven by COVID-19 Mortality

Also of Interest

Premature Mortality During COVID-19 in the U.S. and Peer Countries
Key Data on Health and Health Care by Race and Ethnicity
COVID-19 Cases, Deaths, and Vaccinations by Race/Ethnicity as of Winter 2022

Longevity risk and capital markets: the 2022–2023 update

Published: 19 June 2024
Volume 49 , pages 229–233, ( 2024 )

Cite this article

David Blake 1 &
Johnny Li 2

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This special issue of The Geneva Papers on Risk and Insurance contains nine contributions to the academic literature on longevity risk and capital markets. Draft versions of the papers were presented at Longevity 17: The Seventeenth International Longevity Risk and Capital Markets Solutions Conference , held virtually on 12–13 September 2022 and hosted by the University of Waterloo and the Pensions Institute at City, University of London.

Longevity risk and related capital market solutions have grown increasingly important in recent years, both in academic research and in the markets we refer to as the life market, i.e. the capital market that trades longevity-linked assets and liabilities. Mortality improvements around the world are putting increasing pressure on governments, pension funds, life insurance companies and individuals to deal with the longevity risk they face. At the same time, capital markets can, in principle, provide vehicles to hedge longevity risk effectively and transfer the risk from those unwilling or unable to manage it to those willing to invest in this risk in exchange for appropriate risk-adjusted returns or to those who have a counterpoising risk that longevity risk can hedge, e.g . life offices and reinsurers with mortality risk on their books. Many new investment products have been created both by the re/insurance industry and by the capital markets. Mortality catastrophe bonds are an early example of a successful insurance-linked security. Some new innovative capital market solutions for transferring longevity risk include longevity (or survivor) bonds, longevity (or survivor) swaps, mortality (or q -) forward contracts and reinsurance sidecars (also called strategic reinsurance vehicles). The aim of the International Longevity Risk and Capital Markets Solutions Conferences is to bring together academics and practitioners from all over the world to discuss and analyse these exciting new developments.

As with the previous conferences, Longevity 17 (L17) consisted of both academic papers and more practical and policy-oriented presentations. There were four plenary sessions (1. Climate change and longevity risk; 2. Pension risk transfers plus new capital introduced from capital markets via sidecars; 3. Challenges and opportunities with longevity risk; 4. The development of an exchange market for longevity risk—the time is now), each made up of a number of keynote speeches and presentations. A detailed summary of the sessions can be found in the supplementary material.

The academic papers that were selected for inclusion in this special issue went through a refereeing process subject to the usual high standards of The Geneva Papers on Risk and Insurance. They cover the following themes: longevity-linked products, such as variable lifetime retirement income solutions and equity release mortgages; health inequalities; socioeconomic mortality indices; reserving for longevity risk using frailty-based mortality models; mortality forecasting with machine learning and neural networks; and life expectancy, health and long-term care (LTC) in Taiwan. Below, we briefly discuss each of the nine papers selected.

In ‘A sustainable, variable lifetime retirement income solution for the Chilean pension system’, Olga M. Fuentes, Richard K. Fullmer and Manuel García-Huitrón argue that defined contribution retirement pension systems need to improve the level and stability of payments as pensioners age. Longevity risk pooling is key, but so is flexibility to satisfy members' individual needs and preferences. The authors propose a tontine construct as a flexible and cost-effective investment option for the Chilean pension system. Payouts are for life but are variable since there are no explicit guarantees. The authors’ proposal provides transparency, investment flexibility and higher expected income streams than any of the existing options available to the country’s pensioners. Importantly, it does not distort the existing investment and annuity markets; on the contrary, it complements them. Additionally, it provides a means to offer a form of longevity insurance even if insurers are unwilling to supply it. Furthermore, it is in line with the movement of many countries toward promoting longevity-risk sharing within their defined-contribution systems.

In ‘How suitable are equity release mortgages as investments for pension funds?’, Dean Buckner, Kevin Dowd and Hardy Hulley examine the claim that equity release mortgages, the U.K. equivalent of reverse mortgages in the U.S., are suitable investments for pension funds. They present valuation, stress test and scenario analysis results that suggest that equity release mortgages are unsuitable for pension funds because: (i) they bear returns that are typically below the risk-free rate; (ii) they are not hedges for annuity books, let alone good hedges; and (iii) they are heavily exposed to house price risk, which annuity books are not. Their results suggest that equity release mortgages meet none of these criteria to be suitable for pension funds and are almost entirely dominated by risk-free government bonds. They end by offering an explanation for why investors appear to be unaware of the low returns on equity release mortgages.

In ‘The great health challenge—levelling up in the U.K.’, Les Mayhew, Mei Sum Chan and Andrew J.G. Cairns argue that around the world there are persistent and growing health inequalities, both between and within countries. The U.K. government's flagship policy for addressing inequalities is called ‘Levelling Up’. One of its missions is to narrow the gap in healthy life expectancy (HLE) between the healthiest and unhealthiest areas in England and to improve overall HLE by five years by 2035. The authors show that smoking is one of the major causes of health inequalities. They find a 17-year difference in HLE between local authorities, and that the number of years spent in ill health tended to be greatest in areas with the highest mortality from smoking-related disease. The aim of the paper is to see if the five-year target could be achieved, assuming there were drastic controls on the sale and consumption of tobacco. The authors show that never-smokers enjoy six more years of good health at age 20 than current or ex-smokers. A complete ban on smoking would lead to a 2.5-year improvement in HLE, and also lengthen the working lives of both men and women. The authors conclude that while a complete tobacco ban is significant, other public health measures are needed for the full achievement of the target. The paper briefly considers wider issues and suggestions for further research and its international significance.

In ‘Bringing parametric mortality indexes to practice: a generalised CBD model with stochastic socioeconomic differentials in mortality improvements’, Kenneth Q. Zhou, Johnny S.-H. Li and Pintao Lyu recall that the concept of CBD mortality indexes was proposed in 2014. Further, they note that, while it has been shown that the use of CBD mortality indexes can effectively reduce longevity risk exposures in idealised settings, the risk mitigation potential of such indexes in a more realistic environment, whereby, for example, population basis risk exists, is yet to be investigated. This research gap is addressed in this paper through the development of a generalised CBD model with stochastic socioeconomic differentials in mortality improvements. The proposed model incorporates possible co-integration effects between the mortality dynamics of socioeconomic subgroups and the general population, and features a form of coherence that is less restrictive than the typically assumed full coherence. The paper then conducts various numerical experiments to demonstrate the possible bias in hedge effectiveness that may result if the key features of the proposed model are altered.

In ‘Frailty-based mortality models for reserving for longevity risk’, Maria Carannante, Valeria D’Amato, Massimiliano Menzietti and Steven Haberman argue that, for the life insurance industry and for pension schemes, mortality projections represent a critical issue for accurately managing their exposure to longevity risk. Frailty plays a significant role in the future evolution of mortality, having been identified as the main latent factor explaining this component, mainly due to comorbidities determining deterioration in terms of the human body’s physiological capacity. In this paper, the authors analyse the gap between the actuarial evaluations on premiums and technical provisions calculated under the frailty-based mortality approach and traditional stochastic mortality models that depend on the size of the shock on mortality on some life insurance products. They observe that the former grasp higher riskiness due to the presence of comorbidities. Accordingly, they obtain some noteworthy policy-oriented recommendations: encompassing frailty in mortality modelling allows the profiling of mortality according to the portfolio in force for the insurer, by avoiding the problem of adverse selection.

In ‘Machine learning in long-term mortality forecasting’, Yang Qiao, Chou-Wen Wang and Zhu Wenjun propose a new machine-learning-based framework for long-term mortality forecasting. Based on the ideas of neighbouring prediction, model ensembling, and tree boosting, the authors show that this framework can significantly improve the prediction accuracy of long-term mortality. In addition, the proposed framework addresses the challenge of a shrinking pattern in long-term forecasting with information from neighbouring ages and cohorts. An extensive empirical analysis is conducted using various countries and regions in the Human Mortality Database. Results show that this framework reduces the mean absolute percentage error of the 20-year forecasts by almost 50% compared to classic stochastic mortality models, and it also outperforms deep-learning-based benchmarks. Moreover, including mortality data from multiple populations can further enhance the long-term prediction performance of this framework.

In ‘A mortality improvement neural network model with autoregressive effect’, Hung-Tsung Hsiao, Chou-Wen Wang, I-Chien Liu and Ko-Lun Kung propose a neural network (NN) architecture for a mortality improvement model with a cohort effect. They then extend the mortality improvement NN model to consider the autoregressive effect which allows the mortality improvement to depend on the lagged mortality rates. The advantage of their NN model setup is that the parameters of the period and cohort effects are implicitly estimated by the NN models and hence the mortality projection can be obtained without taking the extra steps of selecting and estimating a suitable time-series model for the period and cohort effects. The empirical results suggest that, based on 48 populations in the Human Mortality Database with complete sets of observations from 1950 with an age span of 55–90, the NN models with cohort and autoregressive effects improve the forecast accuracy of mortality rate projections and provide better predictive performance.

In ‘A spatial analysis of the health and longevity of Taiwanese people’, Jack C Yue, Ming-Huei Tu and Yin-Yee Leong point out that Taiwan’s National Health Insurance (NHI) program, introduced in 1995, now covers over 99.6% of its residents, ensuring widespread medical access. Despite this, regional disparities in medical resource allocation persist. This study investigates the potential urban–rural divide in life expectancy and healthcare utilisation. Drawing data from the Ministry of the Interior (population registration records), NHI Research Database (medical utilisation) and Ministry of Health and Welfare (leading causes of death), the authors employ spatial analysis, visualisation tools and the standardised mortality ratio for assessing regional disparities. Their findings reveal distinct regional mortality differences in Taiwan, with lower rates in northern counties and higher ones in mountainous regions. However, healthcare utilisation shows no significant regional variations. Notably, patterns of overall mortality rates and primary death causes demonstrate spatial clustering.

Finally, in ‘Using the Taiwan National Health Insurance Database to explore the need for long-term care’, Jack C Yue, Hsin-Chung Wang and Yizhen Liou argue that several factors contribute to the lack of LTC insurance in Taiwan, and insufficient experience data and the absence of unified definitions of LTC are two of them. In this study, the authors use LTC-related catastrophic illness (CI) as the assessment criteria to investigate the demand for LTC insurance. They selected 13 categories of CI and explored the spatial–temporal properties of LTC incidence rates and mortality rates from the National Health Insurance Research Database. The study results show that the incidence rates did not change much, while mortality rates decreased significantly. Taiwan’s LTC population, which was 0.29 million in 2013, is accordingly expected to triple before 2040 based on the proposed Cohort Change Ratio approach. Currently, Taiwan’s government has planned to fund LTC insurance via a pay-as-you-go system. Furthermore, the increasing LTC population indicates that commercial insurance can play a vital role as a supplement to social LTC insurance.

Longevity 18 took place on 7–8 September 2023 at Bayes Business School in London; the European Actuarial Journal will publish a special issue. Longevity 19 will be in Amsterdam on 16–17 September 2024; Insurance: Mathematics & Economics will publish a special issue. Longevity 20 and Longevity 21 are planned for Singapore and Rome in 2025 and 2026, respectively.

Acknowledgements

David Blake and Richard MacMinn are co-founders of the Longevity Risk and Capital Markets Solutions Conferences. We are extremely grateful to Marilyn Parris-Bell and Cvent for their superb organisation of the conference.

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Blake, D., Li, J. Longevity risk and capital markets: the 2022–2023 update. Geneva Pap Risk Insur Issues Pract 49 , 229–233 (2024). https://doi.org/10.1057/s41288-024-00314-3

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