Trends in Life Insurance 2022: How the Industry Has Changed

By Nupur Gambhir

Reinsurance News, April 2022


The life insurance industry has experienced dramatic changes since the onset of COVID-19 in March 2020. Growing competition, a rise in online shopping, and the impact of COVID-19 have all led to an increase in contactless and completely digitized life insurance options.

At Policygenius, we wanted to dig deeper into these big industry changes and better understand how they affect life insurance buyers. What our 2022 life insurance trend report found was a changing industry that's making tremendous strides and creating even better pricing and policy options for customers.

The transformation of an industry that once operated on a face-to-face model has done more than simplify the application process for consumers. Life insurance buyers can also expect competitive pricing for no-medical-exam and fully underwritten term life insurance policies alike, as insurers compete for business.

A Changing Buying Journey

Multiple industries are experiencing an uptick in digitized shopping from consumers, and the life insurance industry is no different. In fact, internal Policygenius data shows that fully online life insurance fulfillment more than doubled in 2021. While 26 percent of applications submitted through Policygenius from January to March 2021 were for no-medical-exam policies, that number increased to 56 percent from October to December 2021. Life insurance shoppers are seeking convenience and speed when they purchase a policy, making no-medical-exam options increasingly popular.

COVID-19 Continues to Impact the Insurance Industry

COVID-19 was one of the top causes of death in 2021, and it increased mortality rates across the U.S. Unsurprisingly, an uptick in deaths led to more death claims across the industry. According to the Insurance Information Institute, death benefit payouts across the industry rose by 15 percent from 2019 to 2020, which was the largest jump in almost 25 years. Legal & General America (the parent organization of the Banner Life and William Penn life insurance companies) saw a 12 percent increase in death claims from 2019 to 2020.

While death claims have increased, so have life insurance sales. Data from Insurance Information Institute shows that online sales jumped by 29 percent in 2020, which is the biggest jump for online sales on record.

Life Insurance Pricing Trends

Despite the tumultuous past few years, term life insurance policies cost about the same as they did in early 2020. While inflation hit a three-decade high in October 2021, life insurance prices remained relatively the same throughout the year. For example, the average monthly cost of a $250,000 policy bought in January 2021 was $34.22, while in December 2021, that number only increased by a meager 60 cents to $34.82.

And even with an uptick in demand and death claims, insurers are not likely to make major adjustments to pricing until there is more data available about COVID-19 and long-term mortality trends. While insurers may increase pricing as more data becomes available, for now, they are only focusing on offering competitive pricing.

The pricing stability can also be attributed to the low-interest-rate environment over the past few years that largely impacted the annuity industry and diminished margins for insurers. Because many insurers sold their annuity business, they have more resources to grow their traditional life insurance business and keep prices competitive.

Whole life insurance, on the other hand, hasn’t experienced the same competitive pricing. Low interest rates have instead led to costlier coverage and lower cash value growth.

Buying Trends in the Life Insurance Industry

Contactless Life Insurance Options

Growing popularity in no-medical-exam life insurance products has had one expected outcome: More life insurance policies with accelerated underwriting options available in the marketplace. For example, Policygenius offered just three accelerated underwriting options in 2020. In 2021, that number more than doubled to seven, and more options will likely be available in 2022.

Additionally, while such policies had historically only been available to applicants who were young and in good health, the competitive market has prompted more widespread availability. Now, applicants across all health classes can get no-medical-exam policies.

While no-medical-exam policies tend to be about the same cost as fully underwritten policies, applicants tend to favor them even when they are more expensive due to the convenience and expedited turnaround time.

Demographic Trends

According to Policygenius data, applicants below age 45 made up the biggest group of life insurance shoppers in 2021 and bought 64 percent of policies sold. This is consistent with buying trends across the industry as a whole, with life insurance sales being largely propelled by people under 44. This demographic data isn’t surprising, as this group has the highest amount of financial obligations, including mortgages, student loan debt, and childcare.

People age 44 and under also bought the most policies with $1 million-plus coverage amounts through Policygenius (84 percent), while people age 45 to 64 only bought 16 percent of those policies. Meanwhile, people age 65 and older didn’t buy any policies that equaled more than $1 million in coverage through Policygenius.

Applicants age 45 to 64 tended to buy much lower coverage amounts, with 87 percent of policies they bought through Policygenius amounting to under $250,000 in coverage.

What’s Next for the Life Insurance Industry?

Historically, life insurance companies haven’t made big changes swiftly. But with COVID-19 already accelerating big shifts in the industry, what could be next? Likely, the underwriting process will become even more streamlined, as insurers use data and technology to expedite the process and to make it more appealing to consumers.

Insurers may even begin to use data to implement a process of “continual underwriting,” in which customers are rewarded with lower rates by participating in healthy lifestyle choices. For example, if you start regularly exercising, your life insurance rates might be lower than they were the month before.

Whatever comes next, consumers should expect that life insurers will continue to modernize as they adapt to the current climate and aim to remain competitive to consumers.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.

Nupur Gambhir is a licensed life, health, and disability insurance expert, specializing in pricing trends and the impacts of COVID-19. She's a former senior editor at Policygenius, a one-stop platform where customers can compare and buy insurance policies from top insurance carriers and get unbiased expert advice.