Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured. The insurance company promises a death benefit in consideration of the payment of premium
by the insured.
In 2023, the life insurance industry in America is vast, taking in billions of dollars in premiums each year². According to results from a Forbes Advisor survey on life insurance, at least three in four American adults have some form of life insurance². Women (22%) are twice as likely as men (11%) to lack life insurance².
There are several forces that are shaping the life insurance industry in America in 2023. One of these forces is an increasing awareness of personal risk and security. As we come out of the pandemic, there has been a heightened awareness and concern about personal health as well as personal savings and financial security¹. Many citizens are realizing that they will be personally responsible for their healthcare and retirement savings because several government-provided social-security programs are dealing with high levels of indebtedness¹.
Another force that is shaping the industry is the macroeconomic environment, particularly interest rates. The industry has seen a decade-long era of ultralow interest rates, which has put a lot of pressure on life insurance balance sheets¹. In the past six months, interest rates have risen by more than 300 basis points across several markets and countries¹. While the increase in nominal interest rates does provide a tailwind in the near term for life insurers, there are a few important considerations they also need to keep in mind. One is that they’re dealing with an extremely volatile economic environment in terms of equity market and credit market volatility, which increases return expectations from investors as cost of capital goes up, as well as financial costs such as hedging¹.
In conclusion, life insurance is an important financial product that provides peace of mind and financial security to millions of Americans. In 2023, the life insurance industry in America is being shaped by several forces, including an increasing awareness of personal risk and security, and changes in the macroeconomic environment. It is important for individuals to carefully consider their life insurance needs and to choose a policy that meets their unique circumstances.
Source:
(1) Life Insurance Statistics, Data and Industry Trends 2023. https://www.forbes.com/advisor/life-insurance/life-insurance-statistics/.
(2) The top life insurance trends in 2023 | McKinsey. https://www.mckinsey.com/industries/financial-services/our-insights/insurance/reimagining-the-life-insurance-model-in-2023.
(3) North American Life Insurance Outlook 2023 - Fitch Ratings. https://www.fitchratings.com/research/insurance/north-american-life-insurance-outlook-2023-01-12-2022.
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