Life Insurance Stocks in Focus Amid Coronavirus-Induced Changes

Covid-19 has proved to be an eye-opener for customers of the life insurance industry as they are now more appreciative of the value of life insurance. Prior to this pandemic, even the informed ones had been postponing the purchase of life insurance. And even when they bought it, the insurance cover had always been clearly inadequate. This mindset is probably changing now as customers are visibly opting for more protection products. A life insurance policy should be owned by each and every person at the beginning of their career.

Rising Interest in Insurance Cover

Per a recent survey by Lincoln National Corp. LNC, more than a third of consumers attach importance to life insurance while a similar number confirm that they either have or are planning to purchase one.

According to MIB Life Application Activity, U.S. residents aged below 45 spent a considerable sum on life insurance in July, echoing similar sentiments of excited shoppers who rush to grab a hot new phone or a much-in-demand hand sanitizer. Going by MIB Group report, consumers in that age group filed close to 20% more life applications last month than the July-2019 reading suggests, according to. The under-45 age bracket has been the strongest-performing group  since February after years of putting up a dismal show. MIB’s overall life application activity index was 14.1% higher in July 2020 than a year ago.

Digital Evolution

Insurance industry, which has been slower in comparison to others in the financial services space, has now no option but to embrace digitalization of their processes from selling of policies to claims settlement. In fact the carrier with a smooth and most sophisticated digital operating platform will be the front runner in the current market environment.

Insurers are resorting to online marketing channels to make purchases easy for customers at this time when physical purchases are being avoided.

Per Lincoln National, digital options may increase the possibility of purchasing a life insurance policy, especially among the younger consumers. While 29% of all consumers surveyed will be more likely to buy life insurance, with electronic options at their disposal, the percentage could jump to 40% among the millennials.

A recent Forrester study indicates that more than 90% of new life insurance sales is expected to have a digital interaction by 2020.

The Celent report affirms that nearly half of North American life insurers are investing in direct-to-customer portals, connected e-applications and data-enriched CRM to modernize their distribution channels and target more digitally-savvy customers. Moreover, firms are migrating from their existing processes to digital platforms that enable more incisive analysis, better validation tools and real-time status updates. Data analytics and artificial intelligence are thus revolutionizing the digital value chain for life insurance.

Year to date, the Zacks Life Insurance industry has lost 19% against the Zacks S&P 500 composite’s growth of 5.1%.

Stocks in Focus

Nevertheless, the low interest rate environment is a headwind to life insurers. Fitch recently pointed out that insurers’ earnings and capital will also come under strain from increased reserves due to assumption revisions and for embedded guarantees associated with variable and indexed annuities, pressure on net investment yields and interest margins, increased hedging costs and a reduced fee income due to lower asset balances.

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