In a recent article in the Wall Street Journal titled, Shift to Wealthier Clientele Pus Life Insurers in a Bind, the author states that, in a development all but unnoticed outside the industry, life insurance companies gradually have shifted away from their broad historical base of middle-class households. Instead, statistics show, an increasing portion of insurers’ business consists of selling large policies to wealthier Americans, often as part of complex estate plans.
The shift means that a growing proportion of the tax benefits of life insurance goes to the well-off, not to the middle class that once was the industry’s backbone.
However, according to LIMRA (Life Insurance and Market Research Association), the article focused primarily on the new premium revealed in LIMRA’s quarterly results to gauge the demographics of permanent life insurance sales and didn’t equally use policy count data in drawing their conclusions. To back up their position, LIMRA recently issued these facts about the demographics of permanent life insurance ownership based on policy count:
- By policy count, the majority of permanent policies are sold to middle market consumers.
- The affluent (household income of $100,000 or more) own just 27 percent of existing permanent life insurance policies.
- Those earning $25,000 to $99,000 comprise 55 percent of the population, but own 58% of existing permanent policies.
- If you look at new sales by policy count, consumers earning under $100,000 represent 72 percent of newly purchased permanent life insurance policies. So by this measure, it is truly middle America who are buying permanent insurance and benefiting from it.
So, depending how you view the statistics, either the affluent or middle class Americans are buying more permanent life insurance. Clearly, a greater number of policies are being sold to the middle-market. However, in premiums paid for these policies, the affluent consumers, by virtue of their higher benefits, are paying a larger percentage of premiums collected for permanent policies.