Life Insurance Carriers
Description
Companies in this industry underwrite life insurance and related products including annuities, long-term care, disability, and accidental death and dismemberment policies. Major companies include MetLife, New York Life, and Prudential Financial (all based in the US), as well as AEGON (the Netherlands), AXA (France), Nippon Life (Japan), and Prudential (UK).
Global life insurance premiums are forecasted to grow by about 3% through 2025 to 2035, reaching about $4.8 trillion, according to the Sigma Research of Swiss RE. China is seeing rising demand in sales through interest rates.
The US life insurance industry includes about 8,600 establishments (single-location companies and units of multi-location companies) with annual revenue of about $500 billion.
COMPETITIVE LANDSCAPE
Demand is driven by demographics and the economy. The profitability of individual companies depends on effective marketing and investment strategies and on the ability to accurately estimate future payments. Large companies take advantage of economies of scale in administration and in access to capital, as well as advertising and marketing. Small companies can compete successfully by providing specialized services to communities and organizations, such as current and former military personnel, church affiliations, and fraternal organizations. The US industry is highly concentrated: the 50 largest firms generate about 95% of industry revenue.
Carriers face an aging population, which could result in rising claims. Success may depend on new financial products marketed to a demographic that is more dependent on retirement assets than previous generations.
Many life insurance companies are mutual companies rather than publicly traded companies. A mutual company does not issue stock and is owned by its customers. In some states, savings banks can also sell life insurance policies, which may be less expensive than products offered through insurance agents or brokers. Insurers may also compete with asset managers, unaffiliated broker-dealers, and other financial service companies.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products include life insurance, which accounts for about half of industry revenue, followed by trading securities and health and accident insurance. Other products include reinsurance services, vehicle property and liability, and property and casualty insurance.
Annuities are contracts, sold at a premium or by installments, that pay out to living beneficiaries on a periodic basis. Annuities are sold on a deferred or immediate payout basis and can have either fixed or variable payouts. Variable annuities allow clients more control over investment options; fixed annuities provide guarantees related to income and preservation of principal.
Life insurance is organized into three categories: individual, group, and credit life insurance. Group life policies are provided as employer-paid or voluntary benefits to employees of a corporate client. Credit life guarantees payment of long-term debt such as mortgages in the face of death.
Individual life insurance is sold in two types of policies: term or permanent. Under term life insurance, the individual is covered for a specific length of time. Most insurance coverage available through employee benefits is term life. Permanent insurance provides coverage for the length of the insured person’s life.
The major types of permanent life policies -- whole life, universal life, variable life, variable-universal life -- include investment and savings components. In whole life policies, premiums are higher than the cost of insurance initially, and the excess is held in reserve. That excess grows with investment earnings and additional premiums and funds the policy. The customer can withdraw funds or surrender the policy and receive the cash value, less fees or outstanding loans.
Companies take a customer’s age and health risks into account when they set premiums, a process called risk classification. An applicant with a normal weight who doesn’t smoke and doesn’t engage in risky behaviors or occupations will pay less for a life insurance policy than one who is overweight, or smokes, or who has other health risk factors that affect mortality. Companies will often protect themselves against losses and minimize risk by reinsuring their life insurance policies.
Insurance companies take in premiums from customers and invest those funds in stocks and other investment vehicles. The money held between receipt of premiums and payment of claims is known as the float. Most insurers do not make money on their premiums; earnings come from investments. For this reason, the insurance industry was particularly vulnerable to the economic downturn in the late 2000s. In addition to declining premiums, companies' investments were also hurt by the stock market crash.
Global life insurance premiums are forecasted to grow by about 3% through 2025 to 2035, reaching about $4.8 trillion, according to the Sigma Research of Swiss RE. China is seeing rising demand in sales through interest rates.
The US life insurance industry includes about 8,600 establishments (single-location companies and units of multi-location companies) with annual revenue of about $500 billion.
COMPETITIVE LANDSCAPE
Demand is driven by demographics and the economy. The profitability of individual companies depends on effective marketing and investment strategies and on the ability to accurately estimate future payments. Large companies take advantage of economies of scale in administration and in access to capital, as well as advertising and marketing. Small companies can compete successfully by providing specialized services to communities and organizations, such as current and former military personnel, church affiliations, and fraternal organizations. The US industry is highly concentrated: the 50 largest firms generate about 95% of industry revenue.
Carriers face an aging population, which could result in rising claims. Success may depend on new financial products marketed to a demographic that is more dependent on retirement assets than previous generations.
Many life insurance companies are mutual companies rather than publicly traded companies. A mutual company does not issue stock and is owned by its customers. In some states, savings banks can also sell life insurance policies, which may be less expensive than products offered through insurance agents or brokers. Insurers may also compete with asset managers, unaffiliated broker-dealers, and other financial service companies.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products include life insurance, which accounts for about half of industry revenue, followed by trading securities and health and accident insurance. Other products include reinsurance services, vehicle property and liability, and property and casualty insurance.
Annuities are contracts, sold at a premium or by installments, that pay out to living beneficiaries on a periodic basis. Annuities are sold on a deferred or immediate payout basis and can have either fixed or variable payouts. Variable annuities allow clients more control over investment options; fixed annuities provide guarantees related to income and preservation of principal.
Life insurance is organized into three categories: individual, group, and credit life insurance. Group life policies are provided as employer-paid or voluntary benefits to employees of a corporate client. Credit life guarantees payment of long-term debt such as mortgages in the face of death.
Individual life insurance is sold in two types of policies: term or permanent. Under term life insurance, the individual is covered for a specific length of time. Most insurance coverage available through employee benefits is term life. Permanent insurance provides coverage for the length of the insured person’s life.
The major types of permanent life policies -- whole life, universal life, variable life, variable-universal life -- include investment and savings components. In whole life policies, premiums are higher than the cost of insurance initially, and the excess is held in reserve. That excess grows with investment earnings and additional premiums and funds the policy. The customer can withdraw funds or surrender the policy and receive the cash value, less fees or outstanding loans.
Companies take a customer’s age and health risks into account when they set premiums, a process called risk classification. An applicant with a normal weight who doesn’t smoke and doesn’t engage in risky behaviors or occupations will pay less for a life insurance policy than one who is overweight, or smokes, or who has other health risk factors that affect mortality. Companies will often protect themselves against losses and minimize risk by reinsuring their life insurance policies.
Insurance companies take in premiums from customers and invest those funds in stocks and other investment vehicles. The money held between receipt of premiums and payment of claims is known as the float. Most insurers do not make money on their premiums; earnings come from investments. For this reason, the insurance industry was particularly vulnerable to the economic downturn in the late 2000s. In addition to declining premiums, companies' investments were also hurt by the stock market crash.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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