What You Need to Know
- About 12,000 Americans are reaching 65 every day and need sources of retirement income.
- Millions of younger Americans need life insurance.
- Much of the technology used in the life and annuity industry is still not very good.
It is no exaggeration to say that, in the life and annuities market, brokerage general agencies, advisors, broker-dealers, carriers, and fund companies have never had to do business in such an inscrutable economic environment as 2024.
A sustained era of low interest rates is now a distant memory as the global economy scratches back from a pandemic, which remade almost all industries and accelerated the digital transformation.
Peak 65 is also upon us, signaling a significant demographic shift that will reshape financial planning for generations to come.
With 12,000 Americans reaching age 65 every day and all baby boomers expected to be at least 65 by 2030, the implications are far-reaching. An aging American population is expected to send life and annuity business soaring.
The only constant is change, yet the L&A industry is also brimming with opportunities for growth and transformation.
Here is an examination of the forces exerting change on L&A industry participants.
Easing Inflation and Annuities’ Golden Age
This year began with the Federal Reserve optimistically aiming to enact a series of rate cuts.
Now, as only a single rate cut seems likely, the high interest rates era has persisted, leaving us in a higher-for-longer environment. This is providing more fuel for annuities’ golden age.
LIMRA reported its highest first-half sales results since it started tracking sales in the 1980s, as U.S. annuity sales were $215.2 billion in the first half of 2024, punctuating 15 consecutive quarters of continuous growth.
While interest rates remain high, the Fed now promises multiple cuts in 2025. Further, the consumer price index fell by 0.1% in June, marking the first time it decreased since the pandemic began.
These indicators would seem to portend a cooling of the annuities market.
But, in light of shaky consumer confidence and uncertainties in geopolitics, financial regulations, and the U.S. election, annuities remain a more stable place to invest money versus today’s highly volatile stock market.
Moreover, with the great generational wealth transfer coming in the next 10 to 20 years, consumers will be evaluating options including taking out annuities or passing them on to beneficiaries, who in turn, are going to reroll them into their own annuities.
The brokers, agents, and financial advisors that get in front of this market and strategically support the wealth transfer with slick and personalized processes stand to gain a huge advantage in the long run.
What this means for industry participants is that strategies for capitalizing on demand remain imperative, including digital transformation across the entire value chain to create faster workflows and higher-quality client experiences.
Normalization of Life Insurance Growth
Meanwhile, we’re seeing a burgeoning opportunity in life insurance for all market participants, as a record number of Americans either need or intend to buy life insurance.
The past few years of tectonic external factors have been a powerful learning experience for the industry.
It is no surprise that when COVID-19 emerged, life insurance rose in demand as a global pandemic cast a sharp light on families’ financial futures.
But when inflation crept up, life insurance flattened.
In 2024, we’re seeing some normalization of life insurance growth in the market as the population realizes they can’t kick the can down the road forever. Manufacturers and distributors of life insurance are therefore seeking methods to help close the life insurance gap, especially among middle-income Americans, women, and younger consumers.
But even as research suggests that more Americans intend to purchase life insurance, the question remains, if the desire exists, why aren’t more people buying policies?
The answer lies in the buying process.
Decomplicating the Life Insurance Buying Process
The ability to meet customer demands and understand their needs is a deciding factor in who succeeds in the life insurance industry today.
This is no easy task, as customer expectations have many layers.
Buyers are becoming less tolerant of complicated, two- or three-month-long processes.