03.03.21

Uptick in Interest in Life Insurance During the Pandemic

by: Tim Kehrer and Steve Lipker, Kehrer Bielan Research & Consulting

The COVID-19 pandemic has now witnessed an increase in the number of U.S. households that acknowledge that they do not have sufficient life insurance coverage, after its decline since 2012. According to Larry Cohen, director of the Consumer Financial Decisions [CFD] Group at Strategic Business Insights, “Because attitudes change before behaviors do, attitude trends directionally signal changes most likely to happen. The analysis of attitude shifts resulting from the past two recessions—the dot-com bubble (in 2001) and the financial crisis (the Great Recession) of 2007-09—suggests what will happen if the recession we are currently experiencing were simply another recession. The length, depth, and breadth of the COVID-19 recession are unprecedented in modern history.”

The CFD collected 2020-21 MacroMonitor data in July through September 2020—approximately four months into COVID-19 shutdowns and two months after stimulus checks began to arrive. Essential workers were still on the job, the majority of white-collar workers were able to work from home, and many small businesses were still in operation. Some people receiving stimulus checks were able to save, invest, or pay down debt. Life (except for the very wealthy, who are more inconvenienced than harmed) changed as the recession ground on.

“Experts agree that in many respects, as many as ten years of change have compressed into one. The 2020-21 data reflects the early signs of attitude shifts," Cohen commented.

But in many respects, the pandemic accelerated developments that were already well underway. For example, the bank insurance and securities community has been grappling with declining branch referrals for years, and has been looking for ways to help their advisors to grow their books outside of the branch network. The pandemic forced most banks to limit branch access, further squeezing referrals and perhaps helping the industry to wean its dependence on the branches. The speed of change was breathtaking, but perhaps not unexpected.

Cohen surmises that concerns about COVID-19 may initiate interest in life-insurance protection. “One of insurers' challenges is to find the right mix of product pricing with pandemic-appropriate sales channel. The most vulnerable groups for catching the virus are ethnic groups (Black and Hispanic), lower-income critical workers, and people older than age 65. But for insurers, these targets are often not the best, because of their income constraints and the industry's focus on higher-income households. However, the pandemic does provide a logical opportunity to market to younger families. Digital media must be part of the strategy. Providers need to reach out and educate prospective buyers. Following first lockdowns, 54% of European individuals reported their sales-channel preference for life insurance was digital (according to McKinsey & Company). In the United States, watch for more online sites that compare life-insurance-policy prices.”

Since 1978, the MacroMonitor—a comprehensive, biennial survey of U.S. households—has offered financial-services providers reliable, validated, single-source research about U.S. economic households' needs, attitudes, and behaviors. The MacroMonitor measures all financial areas: transactions, credit, assets, protection, and information and advice.  Each wave of the survey encompasses over 4,000 U.S. households, including an oversample of 1,500 affluent households reweighted to be representative of the U.S. population. The MacroMonitor  is clearly the gold standard of consumer financial databases.

Kehrer Bielan partners with Consumer Financial Decisions to bring the value of the MacroMonitor data to the bank financial advice community.